Hertzian contact damage upon spherical indentation is investigated in alumina-based ceramics designed with embedded textured compressive layers. The effect of the location of the embedded layer and the testing configuration (parallel or normal to the layer orientation) on the sub-surface damage evolution is explored. An acoustic emission system for crack detection and post-mortem cross sectioning are employed to evaluate the onset and extension of damage in the different samples. Distinct acoustic signals detected at different contact loads are correlated with the onset of the ring crack, cone crack propagation and quasi-plastic deformation within the textured layer. The distinct damage mechanisms are influenced by the location of the embedded textured compressive layer and the loading orientation with respect to the layers. The design of layered ceramics for contact applications should consider the loading orientation as well as the contact stress field with respect to the “protective” layer to enhance damage tolerance.