A bioactive two-layer coating consisting of hydroxyapatite (HA) and yttria-stabilized zirconia (YSZ) was investigated on cylindrical polyetheretherketone (PEEK) implants using ion beam assisted deposition (IBAD). Post-deposition heat treatments via variable frequency microwave annealing with and without subsequent autoclaving were used to crystallize the as-deposited amorphous HA layer. Microstructural analysis, performed by TEM and EDS, showed that these methods were capable of crystallizing HA coating on PEEK. The in vivo response to cylindrical PEEK samples with and without coating was studied by implanting uncoated PEEK and coated PEEK implants in the lateral femoral condyle of 18 rabbits. Animals were studied in two groups of 9 for observation at 6 or 18weeks post surgery. Micro-CT analysis, histology, and mechanical pull-out tests were performed to determine the effect of the coating on osseointegration. The heat-treated HA/YSZ coatings showed improved implant fixation as well as higher bone regeneration and bone-implant contact area compared to uncoated PEEK. The study offers a novel method to coat PEEK implants with improved osseointegration.