Yttria stabilized zirconia (YSZ)- NiCoCrAlY alloy composite coatings were synthesized using DC plasma spray deposition. Through varying the YSZ/alloy ratios in the composite powders during deposition onto nickel substrate, functionally graded coatings were obtained, The resultant graded coating with gradual changes of the compositions, thermal expansion coefficients, and Young's moduli ensured low thermal strain mismatch and residual stresses. The graded coating has superior thermal cyclic resistance and tensile bonding strength to duplex coating. SEM observation into the functionally graded coating showed that ZrO2 mixed with Al2O3, Cr2O3 and Y2O3 during atmospheric plasma spray of the YSZ-NiCoCrAlY composites, because selective oxidation occurred to the elements aluminium, chromium and yttrium in the NiCoCrAlY alloy at high temperatures. Ln order to ascertain which oxide exerts the greatest influence on coating properties, NiCr, NiAl and pure Ni powders were employed to form composites with YSZ, respectively. SEM observation and energy dispersive X-ray spectrometry (EDX) analysis confirmed the presence of Cr2O3 + ZrO2, Al2O3 + ZrO2 and limited NiO + ZrO2 mixtures, respectively. Tensile bond test was used to determine the extent of strength enhancement in the coatings by different oxide mixtures. The results indicated that oxidation of aluminium in the NiAl-YSZ coating promoted the formation of fine structures in the composite layer and thus increased the mechanical properties. Composites formed by the NiAl and YSZ powders exhibited highest tensile bond strength among the three coating systems. However, severe oxidation might he deteriorious and should be avoided in order to keep the coating layers at nominal compositions.