Large-area spallation and crack formation during service are big problems of plasma-sprayed thermal barrier coatings (TBCs), owing to their weak bond strengths and high residual stresses. Functional gradient TBCs with a gradual compositional variation along the thickness direction are proposed to mitigate these problems. In this paper, a six-layer structured TBC composed of Y2O3 partially stabilized ZrO2 (YSZ) and La2Zr2O7 (LZ), was prepared by plasma spraying with dual powder feeding ports. This coating had a gradient composition and function. Thermal conductivity of the coating was comparable with that of a single LZ coating while the coefficient of thermal expansion was nearly equal to that of YSZ single coating. The experiment was conducted to compare the thermal shock resistance of a graded coating with a conventional YSZ/LZ double-layer system. Changes in weight and morphology of specimens before and after thermal shock tests were analyzed. Results demonstrated that the thermal shock resistance of the graded coating was superior to the double-layer coating. Typically, a barely visible pimple-like spallation was present on the surface of the graded coating after 21 cycles. On the other hand, obvious delamination was observed for a double-layer coating after six to seven cycles. Special focus was also placed on a comparative investigation of stresses that are closely related to spallation via the use of numerical simulation.