Ti1-xAlxN coated tools are commonly used in high-speed machining, where the cutting edge of an end-mill or insert is exposed to temperatures up to 1100 °C. Here, we investigate the effect of Yttrium addition on the thermal stability of Ti1-xAlxN coatings. Reactive DC magnetron sputtering of powder metallurgically prepared Ti0.50Al0.50, Ti0.49Al0.49Y0.02, and Ti0.46Al0.46Y0.08 targets result in the formation of single-phase cubic (c) Ti0.45Al0.55N, binary cubic/wurtzite c/w-Ti0.41Al0.57Y0.02N and singe-phase w-Ti0.38Al0.54Y0.08N coatings. Using pulsed DC reactive magnetron sputtering for the Ti0.49Al0.49Y0.02 target allows preparing single-phase c-Ti0.46Al0.52Y0.02N coatings. By employing thermal analyses in combination with X-ray diffraction and transmission electron microscopy investigations of as deposited and annealed (in He atmosphere) samples, we revealed that Y effectively retards the decomposition of the Ti1-x-yAlxYyN solid-solution to higher temperatures and promotes the precipitation of c-TiN, c-YN, and w-AlN. Due to their different microstructure and morphology already in the as deposited state, the hardness of the coatings decreases from ~35 to 22 GPa with increasing Y-content and increasing wurtzite phase fraction. Highest peak hardness of ~38 GPa is obtained for the Y-free c-Ti0.45Al0.55N coating after annealing at Ta = 950 °C, due to spinodal decomposition. After annealing above 1000 °C the highest hardness is obtained for the 2 mol % YN containing c-Ti0.46Al0.52Y0.02N coating with ~29 and 28 GPa for Ta = 1150 and 1200 °C, respectively.