Thermal Spraying technologies are proven to be capable of producing composite materials and structures. In the present work, an innovative composite coating was produced to achieve high wear and thermal resistant properties in a single‐step process using air plasma spraying (APS) technique. Tungsten carbide has shown high wear resistance and zirconia coatings exhibited excellent tribological and insulation properties. It is speculated that a composite material consisting of zirconia and tungsten carbide exhibits excellent thermomechanical properties. A powder mixture of 50wt% WC‐10wt% Ni (WC‐Ni) and 50wt% ZrO2‐8wt% Y2O3 (YPSZ) was deposited on a low carbon steel substrate using APS technique. Important microstructural properties of WC‐Ni/YPSZ coating such as splat boundaries, pore and grain morphology, microcracks, phase composition, elemental distribution of coatings, and lattice parameters of the crystals were investigated using optical microscopy, scanning electron microscopy (SEM), energy dispersive X‐ray (EDS), and X‐ray diffractometry (XRD). A good adhesion was observed between different phases in tungsten carbide mixed with zirconia coatings. Decarburization process which occurred during APS process resulted in formation of tungsten hemi‐carbide (W2C) phase in plasma sprayed samples. The calculated crystal size for APS‐deposited coating was smaller than those of feedstock powder.