Ceramic coatings have great potential in protecting vital metal structural components in hydrogen energy and nuclear fusion reactors. Fracture toughness and hydrogen permeation resistance are two key characteristics that determine life span and performance of these coatings. However, there is still no strategy to simultaneously enhance both of these two characteristics. Herein, we developed a one-step approach to fabricate AlPO4 nanosheet reinforced α-Al2O3 ceramic coating with simultaneously enhanced fracture toughness and hydrogen permeation resistance. Different from the external nanosheet addition method of the conventional techniques for fabricating nanosheet reinforced coatings, AlPO4 nanosheets were in-situ formed within α-Al2O3 ceramic coating though a one-step heat treatment process. Owing to the positive reinforcing effect of AlPO4 nanosheets, the fracture toughness of the coating increases by 3 times, achieving an ultrahigh KIC value of 7.1 MPa/m2. Meanwhile, the hydrogen permeation resistance of the coating increases by 78 %, reaching as high as 3440 times that of the steel substrate. Additionally, the Cr–P bonds formed between the coating and substrate ensure their good bonding, with their bonding strength increasing up to 36 MPa. The combination of high hydrogen permeation resistance, high fracture toughness, and high bonding strength makes the AlPO4 nanosheet reinforced ceramic coating a promising alternative for reducing hydrogen permeation in various hydrogen-related fields. This study also provides critical insights and practical guidelines for constructing high-performance functional coatings via nanosheet reinforcement.