The plasma spray process was used to deposit coatings of $ZrO_2$-8wt%Y2O3 powders on mild steel sub-strate, and the characteristics of as-deposited and heat treated coatings have been investigated. Particulary, the variations of porosity, wear resistance, thermal barrier and thermal shock resistance in $ZrO_2$-8wt% $Y_2O_3$coatings after heat treatment under vacuum circumstance have been investigated. The porosity of the coating layer was increased with increased spray distance. In the case of the arc current of 450A and at the spray distance of 50mm, it was obtained the lowest amount of porosity. After heat treatment, the amount of porosity was found to be decreased, and the wear resistance, microhardness and thermal shock resistance were im-proved. However, the thermal barrier was decreased.