The effect of an alumina shell on stainless steel particles used in plasma spraying has been studied. The mean size of the injected particles is about 65 nm and the thickness of the alumina shell is 3 µm. The composite powder is plasma sprayed using a PTF4 type plasma gun with an internal injection 3 mm upstream of the nozzle exit. The results show that without preheating the substrate splats are extensively fingered and become circular when the substrate surface is preheated over 200°C. EDS analysis of the distribution of the various elements shows that the alumina either uniformly covers the stainless steel splat or is distributed in pieces over the surface. This behavior has been explained by collecting particles in flight and analyzing them. A composite stainless steel/alumina coating sprayed on a rough stainless steel substrate preheated to 400°C has been examined and compared with a pure stainless steel coating. Both hardness and cohesion are improved for the alumina coated particles due to the random distribution of alumina within the steel matrix.