Failure mechanisms were investigated for the two layer thermal barrier coatings consisting of NiCrAlY bond coat and $ZrO_2$-8wt.% $Y_2O_3$ ceramic coating during cyclic oxidation. $Al_2O_3$ developed at the ceramic coating/bond coat interface first, followed by the Cr/Ni rich oxides such as $NiCr_2O_4$ and $Ni(Al, Cr)_2O_4$ during cyclic oxidation. It was observed that the spalling of ceramic coatings took place primarily within the NiCrAlY bond coat oxidation products or at the interface between the bond coat oxidation products and zirconia based ceramic coating or the bond coat. It was also observed that the fracture within these oxidation products occurred with the formation of $Ni(Cr, Al)_2O_4$ spinel or Cr/Ni rich oxides. It was therefore concluded that the formation of these oxides was a life-limiting event for the thermal barrier coatings.