The effect of peripheral softening on stretch formability was investigated for high-strength aluminum alloy sheets. The peripheral of 6061-T6 circular blanks were locally heated to soften the blanks using ring-shaped pre-heating plates. Graded blanks of various strength were prepared using various heating conditions. The stretch height of the peripherally softened blank was larger than that of a uniform T6 blank. The maximum stretch height was obtained under the heating condition of 400°C for about 2 s. Three types of failure occurred depending on the heating conditions used. These were failures at the punch head, die corner and free stretching region. The thickness reduction of the punch head of the peripherally softened blank was more uniform than that of the solution-treated blank. The effects of peripheral softening on stretch formability and optimal strength gradient for obtaining the maximum stretch height were predicted by finite element method analysis.