Laser drilling was attempted to make closely spaced cooling holes on YSZ coated metal substrate. As a preparation work for laser drilling, the laser irradiation effect on YSZ coating was investigated. Laser irradiation experiment was performed using a continuous fiber laser (λ=1070nm), with maximum power density of approximately 2000W. The original and irradiated coatings were observed and analyzed through SEM images. Through the overall top surface images and low magnification cross-section SEM images, the destruction features of YSZ coating were obtained. With low laser energy input, the coatings were destructed in terms of crack imitation and propagation; with high laser energy input, the coatings were melted and pushed away. The laser destructive effect is more sensitive with the laser power increasing than with the expanding of irradiation time. Through high magnification SEM images of cross-section, the character of the microstructure of the laser irradiated YSZ coating was summarized and the formation mechanism was concluded. The laser melted YSZ coating can be divided into three layers, including the isometric crystal layer, the columnar crystal layer and the reserved original YSZ layer. The formation mechanism was related to the rapid solidification process and thermal dissipation condition.