The present study investigates an innovative modification of a HVOF (High Velocity Oxy-Fuel) thermal spray process to produce functionally graded thick coatings. In order to deposit thick coatings, certain problems have to be overcome. More specifically these problems include minimizing residual stresses, which cause shape distortion in assprayed components. Residual stresses in coatings also lead to adhesion loss, interlaminar debonding, cracking or buckling and are particularly high where there is a large property difference between the coating and the substrate. Graded coatings enable gradual variation of the coating composition and/or microstructure, which offers the possibility of reducing residual stress build-up in coatings. In order to spray such a coating, modification to a commercial powder feed hopper was required to enable it to deposit two powders simultaneously. This allows deposition of different layers of coating with changing chemical compositions, without interrupting the spraying process. Various concepts for this modification were identified and one design was selected, having been validated through use of a process model, which was developed using ANSYS Finite Element Analysis. The model simulates the flow of nitrogen gas and powder through the system, and verified the supply of mixed composition powders. Based on this information a multi-powder feed unit was manufactured, commissioned and calibrated. Multi-layer coatings of aluminium and tool-steel were sprayed onto aluminium substrates. The chemical composition of different layers of a five layer graded coating was determined using energy dispersive X-ray spectroscopy (EDS) to confirm functionality. Subsequently, various controlled parameters of the HVOF spraying process were studied for this type of coating using 33 factorial design of experiments. Results were analysed in terms of surface stress to deposition thickness ratio. The best combination of spray parameters identified for deposition of the mixed coating resembles those recommended for aluminium powder alone. It is proposed that this arises from the thermal properties of the constituent powders. Different types of aluminium/tool-steel functionally graded coatings were then deposited using the optimised set of spray parameters, and considered using Clyne’s analytical method of stress analysis and Vickers hardness testing method. Coatings composed of thicker layers resulted in much higher residual stress, but also improved hardness compared to thinner samples. It was found that if 5 layers of graded material are sprayed, and the residual stress compared to that of a traditional single layer (of the same thickness), an approximately 48 % reduction can be achieved. However this benefit is mitigated somewhat by the fact that applying these multi-layers reduces the hardness to by approximately 16 % compared to the traditional single layered deposit. Therefore an engineer must compromise between the stress and hardness when designing a functionally graded coating-substrate system.