Fine lamellar microstructure of thermal spray coatings results in their unique properties when compared to conventional materials, e.g. enhanced strain tolerance of the plasma sprayed ceramics when compared to their bulk counterparts. However, detectable changes in the coating microstructure take place already since very low strains. Understanding of the microstructural changes in the coatings is commonly based on the macroscopic stress-strain evaluation e.g. from the four-point bending test or fractographic analysis of failed samples. Some of the advanced techniques such as tomography are not commonly available and their resolution may be insufficient, as small microcracks have a crucial role in the coating properties and failure mechanisms. In this study, advantages of relatively simple direct in-situ microstructural observation of polished cross-sections of thermal spray coatings during mechanical loading by means of scanning electron microscopy and subsequent strain-mapping analysis are demonstrated. Plasma-sprayed functionally graded tungsten-steel composite coating, which is one of the candidates for plasma facing components in the fusion reactors, was selected as a model material. Mechanical loading was applied by three-point bending with the coating surface loaded either in tension or compression.