The Al2O3/ZrO2 coatings (AZ-Cs) with different ZrO2 contents were prepared via Al-Zr(NO3)4 combustion-assisted thermal spraying (CATS) method, and its microstructure evolution, mechanical properties were analyzed by experimental observation and finite element simulation. The results show that along the solidification direction, AZ-Cs contain four different microstructure regions of nano-crystalline, nano-eutectic, equiaxial eutectic and submicron eutectic. The microstructures characteristics of AZ-Cs are drawn based on cooling rates of these regions, and the microstructure evolution mechanism of AZ-Cs is attributed to the solute diffusion during the non-equilibrium solidification process. The hardness and toughness of AZ-Cs reach up to 21.51 ± 0.44 GPa and 5.4 ± 0.25 MPa m1/2, which far surpass these values for Al2O3/ZrO2 ceramics coatings prepared by air plasma spraying (APS). Subsequently, the Al2O3/45 mol.% ZrO2 hypereutectic powders were successfully synthesized by combustion-assisted gas atomization (CAGA) method. There is a regular spherical morphology to the powders, and the insides have typical eutectic structure. The ultra-high cooling rates supplied by CAGA greatly broadens the Al2O3/ZrO2 pseudoeutectic region. Consequently, the microstructure evolution mechanism of AZ-Cs provides a theoretical guidance to prepare high-quality eutectic powders.