Oxidation has been considered as one of the principal disruptive factors in thermal barrier coating systems during service. So, oxidation behavior of thermal barrier coating (TBC) systems with nanostructured and microstructured YSZ coatings was investigated at for 24 h, 48 h, and 120 h. Air plasma sprayed nano-YSZ coating exhibited a trimodal structure. Microstructural characterization also demonstrated an improved thermally grown oxide scale containing lower spinels in nano-TBC system after 120 h of oxidation. This phenomenon is mainly related to the unique structure of the nano-YSZ coating, which acted as a strong barrier for oxygen diffusion into the TBC system at elevated temperatures. Nearly continues but thinner Al2O3 layer formation at the NiCrAlY/nano-YSZ interface was seen, due to lower oxygen infiltration into the system. Under this condition, spinels formation and growth on the Al2O3 oxide scale were diminished in nano-TBC system compared to normal TBC system.