Sol-gel derived YAlO₃/MAX composite coatings were designed as protective coatings for γ-TiAl base intermetallic compounds which exhibit insufficient oxidation resistance at temperatures above 800 ℃. However, at present, it's still a big challenge to achieve crack-free surfaces while preparing YAlO₃/MAX composite coatings via sol-gel processing, especially during drying and low temperature heat treatment. Hence, cracking behavior of YAlO₃/Ti₂AlC composite coatings, which were derived from nanoparticles-gel system, was studied in this work by means of in situ techniques such as high-temperature optical microscopy (HTOM). According to this work, cracking of YAlO₃/Ti₂AlC composite coatings during drying and pyrolysis mainly occurred in stage 3, i.e., the pyrolysis stage of slurry, in which the maximum stress that coating system can tolerate decreased gradually as a result of pyrolysis of the gel network and was eventually exceeded by the increasing internal stresses generated owing to heating and volume change of coating system. Coating thickness, which varied in the plane of coatings and was affected by the difference of drying rate during stage 1, was a critical factor that determined the positions where cracks may be initiated. It was observed that cracks were more easily formed on those sites with thicker coatings, where often produced great stress concentration. Both crack width and spacing can be decreased by applying fast heating rate, since large-scale non-homogeneous distribution of internal stress concentration in coatings was reduced in this way and cracking behavior of coatings was consequently confined into very small region. In this work, a heating rate of 5 ℃/min was the best choice to obtain YAlO₃/Ti₂AlC composite coatings with acceptable surface quality.