This study is intended to improve the high-temperature oxidation of nano-ZGYbY: ZrO₂ 9.5Y₂O₃ 5.6Yb₂O₃ 5.2Gd₂O₃ in order to apply it in the new generation of defect cluster thermal barrier coatings (TBCs) through the employment of an intermediate conventional yttria-stabilized zirconia (micro-YSZ) layer between the bond coat (CoNiCrAlY) and top coat. The specimens were deposited with an atmospheric plasma spray (APS) process on IN738LC superalloy. The cyclic oxidation test was performed in air at 1373 K with 4 h in each cycle. The microstructure of the nano-ZGYbY was studied by field emission scanning electron microscopy, revealing the formation of a bimodal microstructure consisted of nanosized particles retained from the initial APS-processed nanopowder and columnar grains, whereas the microstructure of intermediate micro-YSZ layer consisted of columnar grain splats only. X-ray diffraction of TBCs confirmed the formation of non-transformable (t′) ZrO₂ phase ( < 1.01) as well as the stability of this phase after oxidation. Also, applying an intermediate conventional YSZ layer with a higher CTE and K_IC than that of nano-ZGYbY between the bond and top coats improved mechanical properties in new TBCs and it increased the oxidation life.