The effects of 50-hour heat treatments at 1000degreesC, 1200degreesC, and 1400degreesC on air plasma-sprayed coatings of 7 wt% Y2O3-ZrO2 (YSZ) have been investigated. Changes in the phase stability and microstructure were investigated using x-ray diffraction and transmission electron microscopy, respectively. Changes in the thermal conductivity of the coating that occurred during heat treatment were interpreted with respect to microstructural evolution. A metastable tetragonal zirconia phase, with a non-equilibrium amount of Y2O3 stabilizer, was the predominant phase in the as-sprayed coating. Upon heating to 1000degreesC for 50 hours, the concentration of the Y2O3 in the t-zirconia began to decrease as predicted by the Y2O3-ZrO2 phase diagram. The c-ZrO2 phase was first observed after the 50-hour heat treatment at 1200degreesC; monoclinic zirconia was observed after the 50-hour heat treatment at 1400degreesC. TEM analysis revealed closure of intralamellar microcracks after the 50-hour/1000degreesC heat treatment; however, the lamellar morphology was retained. After the 50-hour/1200degreesC heat treatment, a distinct change was observed in the interlamellar pores; equiaxed grains replaced the long, columnar grains, with some remnant lamellae still observed. No lamellae were observed after the 50-hour/1400degreesC heat treatment. Rather, the microstructure was equivalent when viewed in either plan view or cross-section, revealing large grains with regions of monoclinic zirconia. Thermal conductivity increased after every heat treatment. It is believed that changes in the intralamellar microcracks and/or interlamellar pores are responsible for the increase in thermal conductivity after the 1000degreesC and 1200degreesC heat treatments. The increase in thermal conductivity that occurs after the 50-hour/1400degreesC heat treatment is proposed to be due to the formation of m-ZrO2, which has a higher thermal conductivity than tetragonal or cubic zirconia.