Enhancing mechanical and chemical properties of ceramic coatings is a perpetual objective in the thermal spray community. Utilizing either novel feedstock or thermal spray process modifications are the most plausible ways to achieve enhancements such as improved corrosion resistance or damage tolerance. Quasi-plasticity and ultrahigh yield strength can be obtained with ceramic coatings by increasing the number of nanoscale features in the as-sprayed coating. Currently, thermal spraying using liquid feedstock can produce coatings with very fine microstructures, either by utilizing submicron particles in the form of a suspension or through in-situ synthesis. The focus of this work was to obtain a bimodal microstructure by using simultaneous powder-precursor HVOF spraying. Nanostructure was achieved from YSZ and ZrO2 solution-precursors and the microstructural features were obtained from using a conventional Al2O3 spray powder. The microstructure of the coatings revealed some clusters of unmelted nano-sized ZrO2 embedded in a generally dense matrix of Al2O3. The phase compositions consisted of γ- and α-Al2O3 and tetragonal and monoclinic ZrO2 with the former being dominant. The mechanical strength of the coatings was evaluated by Vickers hardness test and cavitation erosion. The addition of the nanostructured ZrO2 into the coating was found to deteriorate the structural cohesion of the coatings, leading to degraded durability when compared to a conventional HVOF-sprayed Al2O3-coating.