Thermal Barrier Coatings (TBCs) protect metallic components that operate in high temperature environments and enhance their service life. The conventional two-layered TBC system consists of a duplex ceramic top coat (TC) fabricated from 8 wt% yttria stabilized zirconia (8-YSZ) and an underlying bond coat (BC) comprised of intermetallic layers such as NiAl or MCrAlY (M = Co, Ni) etc. In the present study, functionally graded material (FGM) TBCs were fabricated by introducing a third blend layer of 8-YSZ and NiCrAlY, in between the BC and TC in order to enhance the thermal fatigue life of the TBC. The blend layer in FGM TBCs provides a smoother transition in thermal expansion properties between the metallic substrate and the top ceramic coat (8YSZ) which have widely different thermal expansion characteristics compared with each other. In service, thermal fatigue introduces severe tensile stresses between the coated layers and the substrates leading to ultimate detachment of the coatings from the substrates. In this work, residual stress analysis by Cos α method was carried out as a non-destructive assessment tool to foresee the likelihood of onset of failure in the TBCs, well before the damage was visible. The two-layered (conventional) and three-layered (FGM) TBCs were synthesized on Inconel 718 substrates by atmospheric plasma spray (APS) technique. The TBCs were subjected to thermal fatigue tests between 1200℃ (by using gas flame) and ambient temperature and evaluated for residual stress analysis at different stages of thermal fatigue testing. The goal was to assess if residual stress analysis could be used to determine if the TBC was about to fail well before the delamination occurred and the catastrophic failure could be avoided. The tests conducted and results obtained are presented.