The phase evolution of reactive radio frequency (RF) magnetron sputtered Cr0.28Zr0.10O0.61 coatings has been studied by in situ synchrotron X-ray diffraction during annealing under air atmosphere and vacuum. The annealing in vacuum shows t-ZrO2 formation starting at ∼750–800 °C, followed by decomposition of the α-Cr2O3 structure in conjunction with bcc-Cr formation, starting at ∼950 °C. The resulting coating after annealing to 1140 °C is a mixture of t-ZrO2, m-ZrO2, and bcc-Cr. The air-annealed sample shows t-ZrO2 formation starting at ∼750 °C. The resulting coating after annealing to 975 °C is a mixture of t-ZrO2 and α-Cr2O3 (with dissolved Zr). The microstructure coarsened slightly during annealing, but the mechanical properties are maintained, with no detectable bcc-Cr formation. A larger t-ZrO2 fraction compared with α-Cr2O3 is observed in the vacuum-annealed coating compared with the air-annealed coating at 975 °C. The results indicate that the studied pseudo-binary oxide is more stable in air atmosphere than in vacuum.