The effect of excimer laser annealing on the structure and morphology of ceramic coatings were investigated. Alumina-40% zirconia (AZ-40) coatings were sprayed with a water-stabilized plasma spray gun. The coated surface was treated by excimer laser having a wavelength of 248 nm and pulse duration of 24 ns. The surface structure of the treated coating was examined by field emission scanning electron microscope (FESEM) and X-ray diffraction (XRD). A detailed parametric study was performed to investigate the effects of different parameters such as laser energy density (fluence), pulse repetition rate (PRR), and the number of shots on the mechanical properties, surface morphology, and microstructure of the coatings. The results of this study indicated that laser energy and pulse repetition rate have significant effects on surface morphology, porosity, and microstructure of the coating.