The work aims to investigate the failure mechanism of NiCrAlY/YSZ TBCs with a Ni-P/Al composite interlayer on the surface of AZ91D magnesium alloy in 400 ℃ water quenching thermal shock test. NiCrAlY/YSZ TBCs with Ni-P and Ni-P/Al interlayers were prepared on Mg alloy substrate with electroless plating and atmospheric plasma spraying (APS). The failure behavior and mechanism of prepared coating samples were investigated in 400 ℃ water quenching thermal shock test. The phase compositions and the microstructures of the two as-prepared samples before and after thermal shock test were analyzed by X-ray diffractometry (XRD), energy dispersive spectrometer (EDS) and scanning electron microscopy (SEM). After suffering thermal shock for 61 cycles, nearly 60% of upper coating in YSZ TBCs with Ni-P interlayer peeled off. By contrast, the whole upper coating in YSZ TBCs with Ni-P/Al interlayer flaked after 91 thermal shock cycles. The micro-morphologies indicated that the active Mg alloy suffered more severe galvanic corrosion than the aluminum layer as the water medium penetrated into the interface between heterogeneous metals during the water quenching process. Meanwhile, the thermal stresses caused by the mismatch thermal expansion coefficient (TEC) of NiCrAlY bond coating and Mg alloy constantly accumulated and acted on interlayer. The co-effect of corrosion stress and thermal stress induced the fracture of Ni-P and Ni-P/Al interlayer, which led to peeling and failure of coating. Ni-P/Al composite interlayer can effectively improve the oxidation resistance and corrosion resistance of magnesium alloy base, and the thermal stress in the coating is obviously reduced. The whole coating shows better thermal stability and thermal shock life is improved.