The microstructure of reactively sputtered zirconia overcoats (50 nm thick) for magnetic recording media is examined by transmission electron microscopy (TEM). The micrographs show that the microstructure can be altered from a porous to a tightly packed, and then to a coarse-grained, structure depending on the oxygen partial pressure used during film deposition. The porous film deposited under oxygen-deficient conditions resulted in structural relaxation giving reduced film stress and hardness as the continuous voids developed along intergrain regions. Concurrently, the strength of this overcoat film against wear fracture deteriorated due to the presence of these voids. Increasing oxygen partial pressure during film deposition heals these intergrain voids and leads to the coarsening of the cubic-phase grains. At oxygen partial pressure of 0.04 Pa, a relaxed film structure is again observed. However, it results from the low defect density and lattice strain within individual zirconia grains as the film approaches ideal stoichiometry. This relaxation effect, in turn, reduces the stress, hardness, and wear resistance of the overcoat film. Between these two extremes, a tightly packed, fine-grained film microstructure with optimum hardness and wear strength can be obtained by deposition at oxygen partial pressure of 0.02 Pa. © 1990, American Vacuum Society. All rights reserved.