This work is the 2nd part of the previous work done in the series; where, for the first time controlled segmentation crack densities have been developed manually in the coatings, even after the coating deposition. Atmospheric plasma sprayed (APS) Yttria-stabilized zirconia (YSZ)-coatings are deposited on Ni-based superalloy IN738. Thermal cycling performance was tested before and after the development of controlled segmentation crack densities in the coatings at 1150 °C for 500 cycles. In the present work, failure mechanisms in un-segmented coating and alongside the effect of controlled segmentation on the thermal cycling behavior of plasma sprayed YSZ thick coatings are investigated. Results show a promising strain tolerance behavior for the segmented coatings, whereas regular conventional (un-segmented) coating could not sustain at higher temperature after its thermal cycling test. Coating microstructures reveal that four types of coating failure were observed in un-segmented regular coating and it happened due to the formation of thermally grown oxide (TGO). Whereas, segmentation helps to control the excess formation of TGO and therefore a very thin layer of TGO was observed in segmented coating and obvious no coating failure or spallation occurred.