Gd 2 O 3 and Yb 2 O 3 co-doped 3.5mol% Y 2 O 3 –ZrO 2 and conventional 3.5mol% Y 2 O 3 –ZrO 2 (YSZ) powders were synthesized by solid state reaction. The objective of this study was to improve the phase stability, mechanical properties and thermal insulation of YSZ. After heat treatment at 1500°C for 10h, 1mol% Gd 2 O 3 –1mol% Yb 2 O 3 co-doped YSZ (1Gd1Yb-YSZ) had higher resistance to destabilization of metastable tetragonal phase than YSZ. The hardness of 5mol% Gd 2 O 3 –1mol% Yb 2 O 3 co-doped YSZ (5Gd1Yb-YSZ) was higher than that of YSZ. Compared with YSZ, 1Gd1Yb-YSZ and 5Gd1Yb-YSZ exhibited lower thermal conductivity and shorter phonon mean free path. At 1300°C, the thermal conductivity of 5Gd1Yb-YSZ was 1.23W/mK, nearly 25% lower than that of YSZ (1.62W/mK). Gd 2 O 3 and Yb 2 O 3 co-doped YSZ can be explored as a candidate material for thermal barrier coating applications.