Nondestructive and accurate measurement of residual stress in ceramic coatings is challenging, but it is crucial to the assessment of coatings failure and life. In this study, for the first time, the thermal‐cycle dependent residual stress in an atmosphere plasma sprayed thermal barrier coating system has been nondestructively and accurately measured using photoluminescence piezo‐spectroscopy. Each thermal cycle consists of a 5‐minute heating held at 1150°C and a 3‐minute water quenching. The measurement was performed within a crack‐susceptible zone in the yttria‐stabilized‐zirconia (YSZ) top coat (TC) closely above the thermally grown oxide layer. A YSZ:Eu³⁺ sublayer was embedded in TC as a stress sensor. It was found that the initial residual stress was compressive, with a mean value of 240 MPa, which rapidly increased to 395 MPa after 5 thermal cycles (12.5% life) and then increased gradually to the peak of 473 MPa after 25 thermal cycles (62.5% life). After 30 thermal cycles (75% life), the mean stress dropped abruptly to 310 MPa and became highly heterogeneous, with gradual reduction toward final spallation. The heterogeneous stress distribution indicates that many microcracks nucleated at different locations and the spallation occurred due to the coalescence of the microcracks.