ZrO2-NiCr functionally graded material (FGM) was developed by powder metallurgical process. After investigating the preforming and sintering process of mixed powders with different compositions, the suitable fabrication procedure of FGM was determined. Microscopic observations demonstrate that the chemical composition and microstructure of ZrO2-NiCr FGM distribute gradually in stepwise way, eliminating the macroscopic ceramic/metal interface such as that in traditional ceramic/metal joint. The mechanical properties of ZrO2-NiCr system strongly depend on constitutional variation, and display various graded distributions as well.