Yb2O3, Y2O3 co-doped ZrO2 (YbYSZ) coatings and conventional 4 mol.% Y2O3–ZrO2 (4YSZ) coating were deposited by air plasma spraying (APS). The coatings show typical characteristics of APS: lamellar structure and columnar crystallite growth in each lamella. The average grain size of the as-sprayed coating is about 270 nm. XRD results reveal that all the as-sprayed YbYSZ coatings exhibit 100 mol.% non-transformable t′ phase, and 4YSZ coating is composed of 99.15 mol.% t′ and 0.85 mol.% m phase. After aging at 1300 °C for 100 h, all YbYSZ coatings still keep single t′ phase, whereas the monoclinic phase in 4YSZ reaches 14 mol.%. After the heat treatment of 1400 °C/100 h, monoclinic phase in 1.15 mol.% Yb2O3–4 mol.% Y2O3–ZrO2 (YbYSZ1) and 1.87 mol.% Yb2O3–4.85 mol.% Y2O3–ZrO2 (YbYSZ3) are of 2.47 mol.% and 0.55 mol.%, whereas that in 4YSZ increases to 43.3 mol.%. 2.72 mol.% Yb2O3–4 mol.% Y2O3–ZrO2 (YbYSZ2) has the best phase stability, in which no m phase is detected. Thermo-physical results reveal that the thermal conductivity of YbYSZ1 (2.03–1.62 W/mK), YbYSZ2 (1.52–1.19 W/mK) and YbYSZ3 (1.70–1.40 W/mK) are obviously lower than that of 4YSZ (2.29–1.96 W/mK), and YbYSZ2 has the lowest value. YbYSZ can be explored as a favorite material for TBCs application.