In this study, the degree of particle melting in Y2O3 plasma spraying and its effects on coating characteristics have been investigated in terms of microstructural features, microhardness and scratch resistance. Plasma sprayed Y2O3 coatings were formed using two different powder feeding systems: a system in which the powder is fed inside the plasma gun and a system in which the powder is fed externally. The internal powder spraying method generated a well-defined lamellae structure that was characterized by a thin porous layer at the splat boundary and microcracks within individual splats. Such micro-defects were generated by the large thermal contraction of splats from fully-molten droplets. The external powder spraying method formed a relatively dense coating with a particulate deposition mode, and the deposition of a higher fraction of partially-melted droplets led to a much reduced number of inter-splat pores and intra-splat microcracks. The microhardness and scratch resistance of the Y2O3 coatings were improved by external powder spraying; this result was mainly attributed to the reduced number of micro-defects.