<p>This study investigates the seismic performance of fluid storage tanks constructed using functionally graded materials (FGMs) and compares their behavior with conventional isotropic steel tanks. The motivation for adopting FGM lies in its ability to achieve a continuous variation of material properties through thickness, enabling improved stiffness distribution, reduced stress concentration, and enhanced dynamic performance. A finite element model incorporating fluid–structure interaction is developed to evaluate hydrodynamic pressure, base shear, displacement response, and stress distribution under seismic excitation. Radiation damping at the soil boundary is modeled using viscous dashpots, while structural damping is represented through Rayleigh proportional damping. The results demonstrate that the FGM tank exhibits higher natural frequency, reduced maximum displacement, lower peak stresses at critical regions, and improved stress redistribution compared to the conventional steel configuration. Significant reduction in shell–bottom junction stresses and sloshing response is observed, indicating enhanced structural reliability under earthquake loading. The findings confirm that stiffness tailoring through functional gradation provides a promising alternative to traditional homogeneous materials for improving the seismic safety and durability of liquid storage tanks.</p>