In order to reduce the interfacial thermal stress, a novel functionally graded YSZ/Al₂O₃ nanocoating (YSZ/Al₂O₃ FGC) which is hot corrosion resistant was developed with the sols of ZrO₂, Y₂O₃ and AlOOH in this paper. SEM and XRD analyses indicated that the YSZ/Al₂O₃ FGC was about 4.2 μm in thickness and composed of t′-YSZ and γ-Al₂O₃ nanoparticles. Hot corrosion tests showed that the YSZ/Al₂O₃ FGC remarkably restrained the infiltration of the molten NaVO₃ salt into the YSZ substrate. A thermal shock test at 700 °C showed that the thermal shock resistance of the YSZ/Al₂O₃ FGC was enhanced greatly compared with that of the Al₂O₃ coating. The improvement of the YSZ/Al₂O₃ FGC in the thermal cycle lifetime could be attributed to its compositionally graded structure, which decreased the thermal stress due to the thermal expansion coefficient mismatch between the YSZ substrate and the Al₂O₃ coating.