Substantial progress has been made in the last decade in the development of physical vapor deposition processes and in ion implantation technologies to modify the surface properties of engineered materials and products. Hard coatings are now in wide commercial use in tooling applications both to reduce wear and to extend the tool life. However, the use of wear resistant coatings in engineered parts and in gear components is yet to become significant. Some of the problems inhibiting wider use of surface engineering in gear teeth applications are discussed in this paper. A recent development in arc coating to overcome the discrete interface problem is described. Results from a study involving the multi-layer deposition of titanium and nickel from a single, composite cathode are presented and discussed to show that compositionally-graded interfaces can now be produced. It is shown that the prospects for increased use of surface engineering to improve performance the characteristics of heavily stressed components and gears have been enhanced.