Uranium nitride (UN)-uranium dioxide (UO2) composite fuels are being considered as an accident tolerant fuel (ATF) option for light water reactors. However, the complexity related to the chemical interactions between UN and UO2 during sintering is still an open problem. Moreover, there is a lack of knowledge regarding the influence of the sintering parameters on the amount and morphology of the α-U2N3 phase formed. In this study, a detailed investigation of the interaction between UN and UO2 is provided and a formation mechanism for the resulting α-U2N3 phase is proposed. Coupled with these analyses, an innovative ATF concept was investigated: UN microspheres and UO2.13 powder were mixed and subsequently sintered by spark plasma sintering. Different temperatures, pressures, times and cooling rates were evaluated. The pellets were characterised by complementary techniques, including XRD, DSC, and SEM-EDS/WDS/EBSD. The UN and UO2 interaction is driven by O diffusion into the UN phase and N diffusion in the opposite direction, forming a long-range solid solution in the UO2 matrix, that can be described as UO2-xNx. The cooling process decreases the N solubility in UO2-xNx, causing then N redistribution and precipitation as α-U2N3 phase along and inside the UO2 grains. This precipitation mechanism occurs at temperatures between 1273 K and 973 K on cooling, following specific crystallographic grain orientation patterns.