Zirconia (ZrO2) coating formed by plasma spray method is widely used industrially as a thermal barrier coating (TBC). Presently, there are some problems such as spallation and cracks inside the coating. As one solution given by the development of new spaying processing, the gas tunnel type plasma spraying is one of excellent method to enhance the TBC performances. The zirconia-alumina (ZrO2-Al2O3) composite coating formed by this method has a high hardness layer at the surface side of the coating, which shows the graded functionality of hardness, and is superior as a TBC. In this paper, the performance of such high hardness ZrO2-Al2O3 composite coating was investigated and the merit as TBC was clarified. The Vickers hardness of the high hardness layer near the coating surface increased by the thermal process of high energy plasma, which corresponded to the result that the coating became denser. Also, the effect of alumina mixing was discussed about the microstructure of this composite coating. The combination of high hardness of Al2O3 with the low thermal conductivity of ZrO2 resulted to the development of high performance TBC. The transverse thermal conductivity of such ZrO2-Al2O3 composite coatings was proved to be much smaller than that in the longitudinal direction.