Plasma sprayed alumina (Al2O3) coatings has showed a great effect in service the life of engineering tools, while its low thermal conductivity limits its application in heat exchange applications. Aluminum nitride (AlN) is a promising material to improve the thermal conductivity of Al2O3 coatings. This paper proposed a new way to fabricate AlN/Al2O3 coatings through reactive plasma nitriding of Al2O3 powders. It was possible to fabricate cubic-AlN/Al2O3 coatings by spraying Al2O3 powders in atmospheric plasma spray process (APS). During plasma Al2O3 powder reacted in high temperature N2/H2 plasma to form aluminum oxynitride and it easily nitride to produce the cubic AlN phase. Thus, both of Al5O6N and c-AlN phrases have the same cubic symmetry (cubic and closely packed crystal structure). Then, the particles collide, flatten, and rapidly solidified on substrate surface. The high quenching rate of the plasma flame prevents the crystal growth and formation of hexagonal AlN phase. The fabricated coatings consist of c-AlN, α-Al2O3, Al5O6N and γ-Al2O3. The AlN content was improved with increasing the flight time (spray distance) due to increasing the reaction time between Al2O3 particles and the surrounding N2 plasma. It was possible to fabricate AlN/Al2O3 coating consist of 97 wt. % of AlN phase at the spray distance of 300 mm.