This paper investigates the residual stresses and interfacial shear strength of a TiAlN coating on Zr-Nb-Sn-Fe alloy (ZIRLOTM) substrate designed to improve corrosion resistance of fuel cladding used in water-cooled nuclear reactors, both during normal and exceptional conditions, e.g. a loss of coolant event (LOCA). The distribution and maximum value of the interfacial shear strength has been estimated using a modified shear-lag model. The parameters critical to this analysis were determined experimentally. From these input parameters the interfacial shear strength between the TiAlN coating and ZIRLOTM substrate was inferred to be around 120 MPa. It is worth noting that the apparent strength of the coating is high (∼3.4 GPa). However, this is predominantly due to the large compressive residuals stress (3 GPa in compression), which must be overcome for the coating to fail in tension, which happens at a load just 150 MPa in excess of this.