The high melting point and strong chemical bonding of NbB₂ pose a great challenge to the preparation of high-density nanostructured NbB₂ composite coating. Herein, we report a novel, simple, and efficient method to fabricate in-situ NbB₂-NbC-Al₂O₃ composite coating by plasma spraying Nb₂O₅-B₄C-Al composite powder, aiming at realizing the higher densification and ultra-fine microstructure of NbB₂ composite coating. The microstructure and properties of in-situ NbB₂-NbC- Al₂O₃ composite coating were studied comparatively with ex-situ NbB₂-NbC-Al₂O₃ composite coating (plasma spraying NbB₂-NbC-Al₂O₃ composite powder). The reaction mechanism of Nb₂O₅-B₄C-Al composite powder in plasma jet was analyzed in detail. The results showed that the in-situ nanostructured NbB₂-NbC-Al₂O₃ composite coating presented a lower porosity and superior performance including higher microhardness, toughness and wear resistance compared to the plasma sprayed ex-situ NbB₂-NbC-Al₂O₃ coating and other boride composite coatings. Densification of the in-situ NbB₂-NbC-Al₂O₃ coating was attributed to the low melting point of Nb₂O₅-B₄C-Al composite powder and the exothermic effect of in-situ reaction. The superior performance was ascribed to the density improvement and the strengthening and toughening effect of the nanosized phases. The in-situ reaction path could be expressed as: $N{b}_2{O}_5+Al\to Nb+A{l}_2{O}_3$, and $Nb+B_{4}C\to Nb{B}_2+NbC$.