A thermal barrier coating is provided which is adapted to be formed on an article subjected to a hostile thermal environment while subjected to thermally, mechanically and/or dynamically-induced stresses, such as a component of a gas turbine engine. The thermal barrier coating is composed of a bond layer that tenaciously adheres an insulative ceramic layer to the article. The bond layer is formed of a metallic oxidation-resistant material, and has an average surface roughness R.sub.a of at least about 7.5 micrometers, while the ceramic layer is characterized by being segmented by at least two sets of grooves. The grooves have substantially uniform widths of about 100 to about 500 micrometers, with adjacent grooves of each set being spaced about 10 to about 250 millimeters apart. The grooves promote the resistance of the thermal barrier coating to spalling, and are selectively located in the ceramic layer in order to tailor the stress relaxation capability of the thermal barrier coating to the size, geometry and service environment of the article. A preferred method for forming the grooves involves a liquid jet technique by which a portion of the ceramic layer is abraded by a high pressure liquid stream.