Thermally sprayed ceramic coatings are used in environments requiring good wear- and corrosion resistance among others. However, a typical issue with ceramic coatings is their low impact resistance and tendency to fail catastrophically by cracking. In bulk ceramics, the Al2O3-ZrO2–composition has been of interest for long since already small additions of ZrO2 into Al2O3 have shown improvements in fracture toughness compared to pure Al2O3. Efforts are being made to induce this increased resistance to fracturing in thermally sprayed coatings as well, resulting in higher wear resistance due to a more predictable behavior and damage-tolerance. In this work, Al2O3-ZrO2-coatings have been deposited by atmospheric plasma spray (APS) and high-velocity oxy-fuel spray (HVOF) processes. The wear characteristics of the coatings were evaluated with cavitation erosion, delving into the mechanics of the erosion and the resulting microstructural changes in the coatings. Evidence of phase transformation of t-ZrO2 to m-ZrO2 was found during the erosion. The HVOF-sprayed coating exhibited greater wear resistance against the cavitating bubbles due to its finer microstructure.