A nanostructured thermal barrier coating (TBC) was deposited by air plasma spraying. The effect of microstructural evolution on nano-hardness and YoungÕs modulus has been investigated by nanoindentation technique after exposure at 1200°C in air for different times. The results showed that the sintering process of nanostructured TBC at 1200°C was divided into two stages. TBC completely kept the nanostructure with the grain size <100 nm at the first stage of 10 h thermal exposure. The nanostructure was lost gradually at the second stage from 10 to 200 h thermal exposure. During the first stage, nano-hardness and YoungÕs modulus increased rapidly for TBC densification, and Weibull bimodal distribution of both YoungÕs modulus and nano-hardness disappeared as grain grew and most microcracks were healed. The structure of TBC did not change basically, and nano-hardness and YoungÕs modulus increased slightly at the second stage.