10mol% Nd2O3 and Yb2O3 co-doped YSZ thermal barrier coatings were produced by electron beam physical vapor deposition (EB-PVD). Compared to the traditional YSZ coating, the deposited coating has shown tree-like microstructure in each column. Due to this, the co-doped coating is more porous than the YSZ coating. The microstructure evolution of the coating during high temperature exposure at 1373 K was studied. The tree-like microstructure disappeared due to joining of sub-grains during sintering. Thermal growth oxide (TGO) grew quickly at the first few hours and then the growth of TGO became slow in the subsequent high temperature exposure. Cracks generated and propagated in the ceramic top coat and along the interface of the top coat and TGO layer. Finally, the coalescence of such cracks resulted in failure of the TBCs.