The thermal residual stress distribution in a functionally graded cemented tungsten carbide (FG WC–Co) hollow cylinder was examined with an emphasis on the effects of key variables, such as gradient profile and gradient thickness on the magnitude and distribution of the stress field. An analytical direct solution based on solving the governing equations of a cylinder composed of a uniform inner core and a functionally graded outer shell was developed, considering the cylindrical compound as two separate elements: a homogeneous cylinder and a functionally graded shell. Through the graded shell, material properties such as the modulus of elasticity and the coefficient of thermal expansion (CTE), except Poisson's ratio, were considered to vary as a power function of the radius, and proper mechanical boundary conditions were imposed at the interface of the two cylinders. Practical values for the two variables, gradient profile and gradient thickness, were evaluated in the mathematical solution for the FG WC–Co compound, and their effects on the stress distribution were studied. An examination of different gradient profiles showed that with excess Co content in the graded region, compressive radial stresses were created, while with decreasing Co content through the graded region tensile stresses were generated at the interface. The effect of gradient thickness was shown to have a greater effect on radial stress, compared to hoop stress, and increasing the gradient thickness significantly increased the radial stress magnitude.