Pre-alloyed, plasma spheroidized powders were used as feedstock in the plasma spraying of functionally graded ZrO2/NiCrAlY coatings. The advantage of using pre-alloyed powders was to ensure chemical homogeneity and promote uniform density along the graded layers, and these pre-alloyed powders could be successfully used to prepare the different inter-layers of functionally graded coatings. The microstructure, density and microhardness changed gradiently in the ZrO2/NiCrAlY coatings. The bond strength of ZrO2/NiCrAlY coatings with different graded layers was measured. Results showed that for as-sprayed coatings with the same thickness, the bond strength increased with the number of graded layers. The bond strength of the coatings with five graded layers was about twice as high as that of the duplex coatings because of the significant reduction of the residual stress in the coatings. Experimental results also showed that the bond strength of as-sprayed coating increased significantly after hot isostatic press (HIP) and vacuum heat treatments, and the reason can be attributed to the densification of the microstructure, the decrease of defects in the coatings, inter-diffusion between layers and further reduction in the residual thermal stress.