The use of additive manufacturing (AM) enables the fabrication of geometrically complex components by accurately depositing materials in a controlled way. Technological progress in AM hardware and software, as well as the opening of new markets, create demand for higher flexibility and greater efficiency in today’s products, thus encouraging research into novel materials with functionally graded and high-performance capabilities. This field has been termed functionally graded additive manufacturing (FGAM), which is a layer-by-layer fabrication technique that involves gradationally varying the ratio of the material organisation within a component to meet an intended function. As research in this field has gained worldwide interest, the interpretations of the FGAM concept requires greater clarification. The objective of this document is to present a conceptual understanding of FGAM. The current state of the art and capabilities of FGAM technology will be reviewed alongside its challenging technological obstacles and limitations. Here, data exchange formats and some of the recent applications are evaluated, followed by recommendations on possible strategies to overcome barriers and the future direction for FGAM to take off.