Stresses developed within a thermal barrier coating (TBC) due to the mismatch in thermal expansion of different coating components causes coating failure. Nanostructured materials have an increased volume fraction of grain boundaries and this microstructural attribute may allow coatings to relieve the strain in the coating structure; thereby improving the effectiveness and the lifetime of the TBC. Multi – layered TBCs were prepared using two techniques; atmospheric pressure plasma spray using a commercial system, and reduced pressure plasma spray using the Triple Torch Plasma Reactor. The coatings were deposited on mullite and on NiCrAlY-coated steel substrates, and consisted of an inter layer of nano-phase partially stabilized zirconia (n-PSZ) and a layer of yttria stabilized zirconia coating (YSZ) as the top thermal barrier coat. The coatings were heat treated at various temperatures and the microstructural changes analyzed using scanning electron microscopy (SEM) images. It was observed that the changes in porosity, a critical microstructural feature that is necessary for the coatings to perform under operational conditions were not altered significantly - the data lay within the estimated deviations of the image analysis measurements. Mechanical properties of the coating were studied using micro-indentation and four point bend testing to better understand the effect of the n-PSZ inter-layer on the strain relief mechanisms that may be operative within the TBC.