This paper explores the vibration damping properties of thermal barrier coatings (TBCs) containing thin plastically deformable metallic layers embedded in an elastic ceramic matrix. We develop an elastic–plastic dynamical model to study how work hardening, yield strain, and elastic modulus of the metal affect the macroscopic damping behavior of the coating. Finite element (FE) simulations validate the model and are used to estimate the damping capacity under axial and flexural vibration conditions. The model also provides an explanation for the widely observed nonlinear variation of the loss factor with strain in plasma-spayed TBCs. Furthermore, it facilitates the identification of multilayer configurations that maximize energy dissipation.