A thermal barrier coating system and a method for forming the coating system on a component designed for use in a hostile thermal environment, such as superalloy turbine, combustor and augmentor components of a gas turbine engine. The coating system includes a diffusion aluminide bond coat whose oxide growth rate is significantly reduced to improve the spallation resistance of a thermal barrier layer by forming the bond coat to include a dispersion of aluminum, chromium, nickel, cobalt and/or platinum group metal oxides. The oxides preferably constitute about 5 to about 20 volume percent of the bond coat. A preferred method of forming the bond coat is to initiate a diffusion aluminizing process in the absence of oxygen to deposit a base layer of diffusion aluminide, and then intermittently introduce an oxygen-containing gas into the diffusion aluminizing process to form within the bond coat the desired dispersion of oxides. Thereafter, a ceramic layer is deposited on the bond coat to form a thermal barrier coating.
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