<p>Functionally graded materials (FGMs) have emerged as a transformative class of engineered composites, characterised by continuous or stepwise variations in composition and microstructure that enable spatially tailored properties within a single component. This design flexibility offers clear advantages over conventional homogeneous materials and has driven increasing adoption across the aerospace, automotive, biomedical, and other high-performance sectors. Although research on FGMs has expanded rapidly over the past twenty-five years, the growing diversity of processing methods and applications calls for a consolidated assessment. Unlike previous reviews, this work integrates recent manufacturing advances with a comparative evaluation of tribological mechanisms across major FGM systems. The evolution of FGM manufacturing is examined, spanning conventional and additive manufacturing (AM) approaches, with the latter offering unprecedented control over gradient design, enabling precise, reproducible, and customisable architectures. The review synthesises recent findings on the tribological behaviour of metal–metal, metal–ceramic, and ceramic–ceramic FGMs, demonstrating that engineered gradients enhance wear resistance, friction stability, lubrication efficiency, and surface durability under dynamic loading. Optimised metal–ceramic FGMs achieve up to an 87% reduction in specific wear rates relative to homogeneous counterparts through the formation of stable, self-lubricating mechanically mixed layers. Metal–metal FGMs exhibit stable frictional performance and are suited to automotive applications, whereas ceramic–ceramic FGMs excel in high-hardness and erosive environments. Finally, key barriers to industrial adoption were identified, including AM-induced residual stresses exceeding 800 MPa in some cases, challenges with powder recyclability, gradient stability, and process optimisation.</p>