Plasma sprayed ZrO2-CeO2 and ZrO2-CeO2-Y2O3 coatings were investigated to develop advanced thermal barrier coating (TBC) with improved thermal and mechanical properties. The addition of a large amount of CeO2 to ZrO2 decreased the thermal conductivity, but it also reduced the mechanical property like hardness. Addition of Y2O3 to ZrO2-CeO2 was effective to improve the hardness. Double layered coating composed of a low thermal conductive top layer, such as ZrO2-CeO2-Y2O3 and a high strength base layer like yttria stabilized zirconia was fabricated. It exhibited an excellent thermal shock resistance and high thermal barrier capability.