Sand erosion tests were performed on WC-Co and WC-CoCr coatings deposited by the high velocity oxy-fuel spraying method. Several analytical techniques, including X-ray diffraction, Auger electron spectroscopy and energy-dispersive spectroscopy in a transmission electron microscope were used to characterize the microstructures formed during powder processing and spraying. It was found that a substantial fraction of WC decomposed into W2C or reacted with the cobalt matrix to form ternary carbides such as Co3W3C and other mixed compounds. In both cases the binder phase had a nanocrystalline structure of size 4-8 nm containing tungsten, cobalt, carbon and chromium elements. The addition of chromium inhibits to a large extent the decomposition of WC and avoids the formation of metallic tungsten. In addition, chromium improved the erosion resistance by several times compared with the WC-Co coating. Scanning electron microscopy showed that the CoCr matrix binds carbides better than the cobalt matrix, thereby inhibiting carbide loss at the spray particle boundaries. The hydroabrasive wear behaviour of coatings and the mechanisms for material removal are discussed with respect to the microstructures formed during spraying.