Suspension Plasma Spray (SPS) is a novel process for producing nano-structured coatings with metastable phases using extra small particles as compared to conventional thermal spraying. Suspension spraying involves, atomization, solvent evaporation and melts consolidation, which can cause substantial complexity in the system. Using feedstock mixtures for composite coatings, such as alumina and zirconia, intricacy of the system increases even more. There is consequently a need to better understand the relationship between plasma spray conditions and resulting coating microstructure and defects. In this study, an alumina/ 8 wt% yttria stabilized zirconia was deposited by axial injection SPS process. The effects of principal deposition parameters on the microstructural features are evaluated by using Taguchi design of experiment (DOE). The microstructural features include microcracks, porosities and deposition rate. To better understand the role of the spray parameters, in-flight particle characteristics, i.e. temperature and velocity were also measured. The role of the porosity in this multi-component structure is studied as well. The results indicate that thermal diffusivity of the coatings, an important property for potential thermal barrier applications, is barely affected by the changes in porosity.