In this work, alumina (Al2O3) reinforced with zirconia viz., 0, 3, and 8 mol% yttria doped (i.e., ZrO2, 3YSZ, and 8YSZ), and 4 wt% carbon nanotube (CNT) are coated on Inconel 718 substrate by atmospheric plasma spraying (APS). Reinforcement by CNT and 3YSZ has led to a substantial enhancement in the fracture toughness from 3.89 MPa m(1/2) (for Al2O3) to 5.90 MPa m(1/2) in the reinforced composite. It is observed that CNT has contributed similar to 5-12% toughness enhancement, whereas similar to 15% contribution to toughening is obtained via tetragonal to monoclinic (t -> m) transformation of zirconia. Moreover, CNTs not only assist the t -> m transformation but also enhance the toughness value of Al2O3-based thermal barrier coatings (TBC) near to its upper theoretical bound estimated using modified fractal model. Moreover, the effective thermal conductivity is estimated using modified theoretical models embracing the aligning factor of CNT in APS coatings, which unequivocally confirms the superiority of Al2O3 reinforced with 3YSZ and CNT as a potential TBC. (C) 2017 Elsevier Ltd. All rights reserved.