In this study the axisymmetric interface crack problem in a layered medium that consists of a substrate, bond coat, thermally grown oxide and a graded top coat is considered. The top coat is assumed to be under thermally or mechanically induced compressive stresses. By using a nonlinear continuum theory the instability and postbuckling problems are solved, the crack opening displacement, the strain energy release rate and the stress intensity factors are calculated, and the results are compared with that obtained from the von Karman plate theory.