This paper presents an overview of the production of functionally graded materials (FGMs) using directed energy deposition (DED) where the advancements, challenges, and future directions in this field are explored. Functionally graded materials entail the joining of two or more different materials to produce a part of which the chemical and thus mechanical properties vary along one or more dimensions of a part. This study explored the benefits of FGMs, including enhanced multifunctionality, weight optimization and reduced cost. Additive manufacturing (AM), particularly DED, has emerged as a promising technique for fabricating complex FGM structures. By utilizing FGMs, designers can overcome the limitations imposed by expensive materials when developing critical components. Through strategic engineering, the material composition of the part can be tailored as a gradient between expensive materials and more affordable alternatives in non-critical regions. This approach optimizes costs while ensuring performance requirements are met. It is also widely acknowledged that utilizing AM techniques in place of or in addition to conventional manufacturing techniques can decrease material waste. The reduced material waste and enhanced resource utilization offered by DED make it a good solution for sustainable manufacturing. Furthermore, by harnessing the potential of FGMs and DED, industries could unlock new design possibilities, improve product performance, and achieve greater manufacturing efficiency.