Al₂O₃/xTiO₂ (where x = 0, 3, 13 and 20 wt%) composite coatings were deposited onto mild steel substrates by atmospheric plasma spraying of mixed micron-sized Al₂O₃ and nano-sized TiO₂ powders. Phase transformation from mainly stable α-Al₂O₃ and anatase-TiO₂ in the powders to predominant metastable γ-Al₂O₃ and rutile-TiO₂ in the coatings was observed. Reaction between Al₂O₃ and TiO₂ phase also occurred producing Al₂TiO₅ phase. Microstructural investigation showed that well separated TiO₂lamellas were homogeneously dispersed between Al₂O₃ lamellas. Hardness was found to decrease with increasing TiO₂ content while fracture toughness increased. The average wear rates of composite coatings determined by sliding wear test were lower than that of monolithic Al₂O₃ coating by approximately 40%. This was mainly attributed to an increase in fracture toughness and reduction of friction coefficient due to a presence of TiO₂ splats.