Thermal barrier coatings (TBCs) were prepared by the recently-developed detonation gun spray process. The oxide scale formation and micro-damage evolution of these coatings during oxidation in air at 1100 °C were investigated. It was found that duplex oxide scales, the upper oxide mixture scale and α-Al2O3 subscale, form at the interface between bond coat (BC) and top coat (TC) during the oxidation. Microcracks usually nucleate within the porous oxide mixture layer. With the increase of oxidation time, some microcracks coalesce to form a long crack. Residual stress in the thermally grown oxides (TGO) was measured using photo-stimulated luminescence spectroscopy. It was found that compressive residual stress exhibits a fast increase at the beginning of oxidation up to maximum value for about 10h. Then, the compressive stress begins to decline up to 100h. Local stress distribution showed that the micro-damage in the TGO causes a remarkable decrease in the magnitude of compressive residual stress.