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 TiO2 lamellas 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.