Fracture toughness of thermal barrier coatings (TBCs) has gained significant interest in recent years as one of the dominant design parameters dictating selection of materials and assessing durability. Much progress has been made in characterizing and understanding fracture toughness of relevant TBC compositions in their bulk form, but it is also apparent that the toughness is significantly affected by process-induced microstructural defects. In this investigation, a systematic study of the influence of coating microstructure on the fracture toughness of atmospheric plasma-sprayed TBCs has been carried out. Yttria partially stabilized zirconia (YSZ) coatings were fabricated under different process conditions inducing different levels of porosity and defect densities. Fracture toughness was measured on free-standing coatings in as-processed and thermally aged conditions using the double torsion technique. Results indicate significant variance in fracture toughness among coatings with different microstructures including changes induced by thermal aging. Comparative studies were also conducted on an alternative composition, Gd2Zr2O7 which, as anticipated, shows significantly lower fracture toughness compared to YSZ. The results not only point toward a need for process and microstructure optimization for enhancing TBC performance, but also a framework for establishing performance metrics for promising new TBC compositions.