Composite coating on GH4169 alloy is prepared by laser cladding yttria-stabilized zirconia (YSZ)@Ni core–shell powders mixed with NiCoCrAlY alloy powders. The cyclic oxidation behavior of the coatings, especially the growth process of the oxide layer, is investigated based on experimental research and first-principle calculations. The results indicate that the oxidation resistance of coated GH4169 alloy is better than that of uncoated GH4169 alloy. The coating has three layers: a cellular dendrite outer layer, a planar YSZ interlayer, and an inner layer composed of Cr₂O₃ formed during laser cladding. After oxidation at 1000 and 1050 °C, as the oxidation time increases, the cellular dendrite outer layer becomes thicker, and the planar yttria-stabilized zirconia interlayer becomes thinner. Between the planar interlayer and Cr₂O₃ inner layer, an Al₂O₃ layer formed. Notably, cracks formed in the interface of Al₂O₃/Cr₂O₃ owing to their weak interface strength, which led to the failure of the composite coating.