The correlation between microstructural and phase evolution in aged, yttria-partially-stabilized zirconia, air plasma-sprayed coatings is discussed. Freestanding coatings with the dense, vertically cracked structure were isothermally aged at 1482°C (2700°F) in air. Characterization of the resulting microstructures was conducted using transmission electron microscopy, then compared with a parallel analysis of the phase evolution via synchrotron X-ray diffraction (XRD) described in Part I. Additional context was provided by related studies on vapor-deposited coatings. Several salient points can be extracted from these assessments. XRD was further validated as a practical method for studying phase stability after clarification of how the possible phases are defined, including the following: (i) the nature of the t′ phase observed in XRD after phase decomposition has begun and (ii) the relationship between the Y-rich tetragonal (t″) and Y-rich cubic (c) phases reported to coexist via XRD. A strong relationship between the initial microstructure and the subsequent phase destabilization is also reported. As a result, phase evolution is proposed to proceed via two competing routes. The interplay between these mechanisms dictates the incubation time for monoclinic formation within a given coating.