In this study, the effect of mechanical milling and YSZ addition on properties of HVOF-sprayed CoNiCrAlY/YSZ coatings was investigated. First, various amounts of YSZ powder (0%, 5%, 10% and 15 wt.%) were mixed with CoNiCrAlY powder and milled for 12, 24 and 36 hours. Then, taguchi experimental design method was used to attain optimum thermal spray parameters. Nanocrystalline powders and commercial one deposited on Inconel-617 substrate with HVOF method. The structural, morphological and thermal stability evolutions of the mechanically milled powders and coatings were investigated using X-ray diffractometry, scanning electron microscopy with energy dispersive spectroscopy and optical microscopy. Vickers micro and macro hardness test was used to evaluate the hardness and fracture toughness of powders and coatings. Cyclic oxidation test in 1000°C for 100 hours was performed to probe the oxidation resistance of coatings. The pin-on -disk test with 5 N load and 1000 m sliding distance was used to cold and hot wear resistance assessment of coatings. Cold and hot wear tests were executed at 25°C and 700°C, respectively. The results show that the powder milled for 24 hours have optimum properties. The nanostructured coatings show high porosity (1.2%-5.4%) due to lack of proper powder morphology, unlike the commercial coating ( 0.2%). However, the mechanical properties of composite coatings are better than commercial one owing to existence of YSZ reinforcement. Structural evaluation shows that the 10% YSZ coating have lowest grain growth between coatings. Presence of very fine YSZ particles inhibited grain growth. Oxidation resistance of nanostructured coatings were found to be lower than commercial one due to high level of porosity; while, cold and hot wear resistance of composite coating were superior to commercial coating. . The dominant wear mechanism in cold wear was abrasive in composite coatings and adhesive in commercial one. Moreover, tribochemical wear mechanism was observed in all coatings; while, tribochemical wear mechanism was probably dominant mechanism in hot wear test. Keywords MCrAlY, YSZ, HVOF, high temperature oxidation, wear.