Low-expansion Ni + CrAlYN and Ni + CrAlYNO nanocomposite coatings were prepared by reactive vacuum arc evaporation using a NiCrAlY target in N2 and mixture of N2 + O2, respectively. After 500 h oxidation tests, the Ni + CrAlYN coating degraded to almost a metallic one and segregation of substrate elements, e.g. Co, Ti and Mo, in the alumina scale was observed. By contrast, the outer parts of the Ni + CrAlYNO coatings still contained lots of nano-sized AlN particles, and few impurities were detected in TGO. Thus, oxygen incorporation in the nanocomposite coatings improved the oxidation resistance by slowing down the coating degradation.