Preparation of tritium permeation barrier (TPB) coating on the surface of structural materials is one of the most effective solutions to solve the issue of tritium permeation in tritium breeder blanket. The FeAl/Al2O3 coating is considered as the most promising candidate material for TPB coating due to its low hydrogen isotopes permeability, good adhesion and excellent radiation resistance. However, the current reported performance of FeAl/Al2O3 coating is much lower than its theoretical value. This work proposed a three-step process to prepare FeAl/Al2O3 TPB coating. By magnetron sputtering deposition, aluminizing and in-situ oxidation, a layer of high quality γ-Al2O3 about 250 nm thick was successfully formed on the 304 stainless steels. The Al2O3 layer was dense and no obvious defects were found. The gas-driven permeation measurements showed that the coating sample had strong ability to inhibit deuterium permeation, where the deuterium permeation flux was reduced by 5 orders of magnitude compared to the uncoated one at 600 °C, which is the best reported performance. Meanwhile, the thermal shock resistance test showed that the coating had no cracks after 50 thermal cycles. Moreover, the coating had a high electrical resistivity of approximately 3.42 × 1014 Ω cm, which could effectively reduce the magneto-hydrodynamic pressure drop (MHD) effects.