Gd₂Zr₂O₇ (GZO)-based compounds are currently one of the most promising materials for thermal barrier coatings (TBCs), in which some dopants are introduced. The dopants induce changes in the GZO lattice and improve the properties; however, the underlying mechanisms related to the solid solution modes of the dopant remain insufficiently understood. In this study, first-principles calculations were employed to investigate the solid solution mechanism of Yb and Sc codoping in GZO. The results showed that both substitutional and interstitial doping coexist in the GZO lattice. At a Yb doping content of 12.5 at%, a substitutional solid solution formed in the GZO lattice, and with further introduction of Sc into the lattice, the Sc atom occupied interstitial sites at concentrations below 5.88 at%. The calculation results indicate that 11.76 at% Yb and 5.88 at% Sc codoped GZO (GYbSc) exhibited the lowest thermal conductivity, the highest coefficient of thermal expansion (CTE), and relatively high toughness. Experimental results demonstrated that GYbSc exhibits high toughness (2.09 MPa·m^1/2). At 1200 °C, the coefficient of thermal expansion of GYbSc increased by 5% compared with that of GZO, and its thermal conductivity decreased by 37%, with values of 11.059×10⁻⁶ and 0.935 W·m⁻¹·K⁻¹, respectively. GYbSc also displayed outstanding CaO–MgO–Al₂O₃–SiO₂ (CMAS) corrosion resistance. This work not only explores a promising TBC material but also provides a new perspective for clarifying the mechanisms for the improved properties of doped compounds and developing novel TBC materials.