Abstract Thermal barrier coating (TBC) structures composed of Al 2O 3 and ZrO 2 with different chemical compositions on the NiCoCrAlY bondcoat are proposed to improve the oxidation resistance of TBC systems. The concept of functionally graded materials is applied to manage residual stresses due to sharp interface between dissimilar materials that can lead to a premature failure of TBC system. A numerical study using finite element analysis (FEA) was performed to investigate the effects of system architecture on the residual stresses developed in functionally graded-thermal barrier coatings (FG-TBCs) and in a typical duplex TBC comprising of NiCoCrAlY bondcoat and ZrO 2 topcoat. The effects of different cooling rates and substrate preheating process on the residual stress distribution were also evaluated. The results show that lower cooling rate and substrate preheating process reduce stresses within duplex coating. In addition, the incorporation of Al 2O 3 interlayer results in a manageable level of residual stress. Stresses at critical locations are reduced, and hence contributing to an increase in resistance to interfacial cracking. The probability of surface cracking is also reduced since the radial and tangential stresses within FG-TBC system are lower than in the duplex system. To provide adequate comparison to the computational results, X-ray diffraction was used to assess the residual stresses in the ZrO 2 coating surface. The measured residual stress was qualitatively in agreement with the numerical results obtained from FEA.