Cavitation erosion is a huge problem in engineering structures working under hydrodynamic conditions. The synergistic effect of erosion and corrosion can aggravate the material removal by several orders of magnitude. Surface coatings are widely used to address material degradation by erosion–corrosion. However, non-homogenous microstructure and presence of defects leads to premature coating failure under erosion–corrosion conditions. Thus, it is imperative to identify plausible solutions to address cavitation-related material degradation. In this study, Ni-Cr-5Al2O3 coatings were deposited on stainless steel substrate using high-velocity-oxy-fuel technique. The as-sprayed coating showed highly non-homogeneous microstructure comprising splats, pores, intermetallic compounds and elemental segregation. A new thermo-mechanical processing technique, stationary friction processing (SFP), was utilized for achieving through-thickness microstructural refinement in as-sprayed coating. As-sprayed and SFP-treated coatings were tested in pure cavitation erosion, corrosion in 3.5\% NaCl solution and erosion–corrosion. SFP treatment resulted in 5-times enhancement in the erosion and corrosion resistance compared to as-sprayed coating. The remarkable performance of Ni-Cr-5Al2O3 coatings after SFP treatment is attributed to significant enhancement in the mechanical properties including hardness and fracture toughness which is the consequence of complete removal of splat boundaries, pores, intermetallic compounds and uniform element distribution up to the coating–substrate interface. © 2020, ASM International.