The residual stresses of functionally gradient materials induced during the fabrication process were analyzed by comparing with two-layer composites prepared by direct bonding. Functionally gradient materials can be grouped into three classes, structurally gradation plates from the surface to the back, gradation coatings formed on the substrate, and gradation joints formed between base metals. In this paper, firstly, these three types of functionally gradient materials of stabilized zirconia/nickel-based alloy composites were chosen for finite element method analysis of residual stress distributions. It was verified that the residual stresses induced by uniform heating process could be decreased by use of the gradation techniques. Especially, the stress singularities at the edge of the interface of direct bonding composites were eliminated in case of the functionally gradient materials. Secondly, the effects of gradation size and material constants, such as Young's modulus and thermal expansion coefficients on the residual stress of the functionally gradient materials were investigated by the thermo-elastic analysis using the finite element method. It was found that the residual stresses could be effectively analyzed by application of a dimensionless parameter, which is σ(1-μ1)/[E1(α1-α2)ΔT] (σ: residual stress, μ1=μ2: Poisson's ratio, E1: Young's modulus of material 1, (α1-α2): difference in thermal expansion coefficient between materials 1 and 2, ΔT: temperature difference) in case of the functionally gradient materials. Thus, the analytical results indicated that the fabrication of large functionally gradient materials was difficult because of the increasing of the residual stresses for the same gradation thickness.