In coating, especially in the arc spraying process, oxidation leads to the deterioration of wear and corrosion-resistant properties. In the present work, an effective shrouding arrangement is designed and introduced to arc spray gun to reduce oxidation content in the coating. The effect of shrouding on microstructural and coating properties is analysed by the characterization techniques, such as SEM, EDS, XRD and Vickers microhardness testing. Adhesion strength and fracture toughness were also measured. Results showed that almost 70% oxidation reduction is found in as-sprayed coating. It is concluded that the shrouding attachment increases inter-splat cohesion, adhesion strength and also produces coatings with optimum oxide content and porosity. Furthermore, On the contrary, corrosion resistance of air-atomized coatings was found better than nitrogen-atomized coatings owing to oxide phase formation.