A unique deposition approach combining atomic layer deposition (ALD) and magnetron sputtering was used to fabricate a series of thin film multilayer structures of Al (50 nm) and Al2O3 (ALD, 2.4–9.4 nm) on flexible polymer substrates without breaking vacuum. The multilayers together with 50 nm and 150 nm Al reference films were analyzed by cross-sectional TEM analysis and experimentally strained in biaxial tension to investigate their deformation behavior. Al film stresses and peak widths, measured in situ with Synchrotron X-ray diffraction, are in good agreement with post-mortem surface SEM and through-thickness FIB analysis of the multilayers. It was revealed that brittle cracking of the multilayer can be avoided, and that the lateral and through-thickness crack resistance improve as a function of decreasing oxide layer thickness. An attempt to model the full biaxial yield surface of the multilayers, which remains experimentally challenging, appears to be valid up to 2.4 nm oxide thickness. Model predictions are further compared to compression data, obtained from the unloading segments of the tensile tests. Describing the mechanical behaviour under multiaxial stress conditions is of utmost importance for a diverse understanding of these multilayers across a variety of potential carrier systems and loading cases.