Thermal spray fabrication of rare-earth permanent magnetic coatings (PMCs) presents potential manufacturing routes for micro-magnetic devices. Despite this potential, thermal spray of PMCs is still not widely explored due to oxidation concerns. It was established that oxidation leads to the loss of ferromagnetic phases in these materials and results in deterioration of magnetic performance. Although this review focuses on a specific class of material, i.e., magnetic materials, there is significant technical crossover to all classes of feedstocks that are employed in thermal spray processing. The oxidation mechanisms and the associated influencing factors are explored in this work to implement effective processing techniques during the deposition process. This paper reviews the various stages and mechanisms of oxidation in thermal spray processes. The factors that influence the extent of oxidation depend on the type of oxidation that is dominant and rely on the type of spray system, powder injection position, and the particle size of feedstock. Among the aspects that are reviewed include the oxygen-fuel ratio for high velocity oxygen-fuel (HVOF), current intensity, gas flow rate, particle size, spray distance, and substrate temperature. Protection strategies to minimize oxidation in thermal spray processes, such as gas shrouding and shielding, are presented.