Elemental Cr/C/Al multilayers (stoichiometric ratio: 2:1:1) with and without a Cr overlayer have been synthesized on Zircaloy-4 substrates by magnetron sputtering. The effects of annealing temperatures (400 and 550 °C) on phase/microstructure formation, mechanical properties, and oxidation/corrosion performance have been comparatively studied. Annealing of the multilayers at 400 °C led to the formation of nanocrystalline composite consisting of intermetallic and binary carbide phases. Single-phase Cr2AlC was obtained after 550 °C annealing, but with microcracking of the coatings. Both annealed coatings displayed similar mechanical properties, high-temperature oxidation, and hydrothermal corrosion mechanisms. The composite coatings annealed at 400 °C significantly enhance the high-temperature oxidation resistance (α-Al2O3 scale growth) and hydrothermal corrosion (Cr2O3 passivation layer formation) of a Zircaloy-4 substrate without coating microcracking and delamination. Nanocomposite CrCAl-based coatings are promising candidates for coated ATF applications with acceptable processing temperatures and excellent oxidation/corrosion resistances for a zirconium alloy substrate.