This paper investigates the residual stresses and interfacial shear strength of a TiAlN coating on Zr–Nb–Sn–Fe alloy (ZIRLO™) substrate designed to improve corrosion resistance of fuel cladding used in water-cooled nuclear reactors, both during normal and exceptional conditions, e.g. a loss of coolant event (LOCA). The distribution and maximum value of the interfacial shear strength has been estimated using a modified shear-lag model. The parameters critical to this analysis were determined experimentally. From these input parameters the interfacial shear strength between the TiAlN coating and ZIRLO™ substrate was inferred to be around 120 MPa. It is worth noting that the apparent strength of the coating is high (∼3.4 GPa). However, this is predominantly due to the large compressive residuals stress (3 GPa in compression), which must be overcome for the coating to fail in tension, which happens at a load just 150 MPa in excess of this.