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Abstract: One of the toughest challenges that hinders the application of ceramic coatings is their poor damage tolerance. Addressing this problem requires the development of novel micro- or nanostructures that would impart to these coatings both high hardness and high toughness. In this paper, CrAlN coatings, with varying Al contents up to 30at.%, were engineered onto steel substrates using the magnetron sputtering technique. Whilst the addition of Al does not significantly alter the columnar microstructure, it does change the preferred grain orientation and increase the compressive residual stress. Moreover, the hardness, elastic strain to failure (H/E) and plastic deformation resistance (H 3/E 2) of the resultant CrAlN coating with the highest Al content were found to increase ∼47, ∼29 and ∼140%, respectively, as compared to CrN. Evidence collected from transmission electron microscopy and X-ray photoelectron spectroscopy experiments shows that AlN, existing in an amorphous state at the columnar CrN grain boundaries, has a crucial role in providing the unusual combination of high hardness and exceptional damage resistance. The results provide a new pathway to developing durable ceramic coatings suitable for applications involving severe loading conditions. [Copyright &y& Elsevier]