Excellent damping capacity and superelasticity of the bulk NiTi shape memory alloy (SMA) makes it a suitable material of choice for tools in machining process as well as cavitation resistant and tribological systems. Although thin film of NiTi has a same damping capacity as NiTi bulk alloys, it has a poor mechanical properties and undesirable tribological performance. This doctoral study aims at eliminating these application limitations for NiTi thin films. In order to achieve this goal, NiTi thin films were magnetron sputtered as an interlayer between reactively sputtered hard TiCN coatings and hot work tool steel substrates. It was hypothesized that the findings of this study could specify the coating properties which are required to fabricate cavitation as well as sliding wear resistant physical vapor deposited (PVD) coatings based on NiTi thin films.