Functionally graded materials (FGMs) are special composites consisting of two constituent phases whose composition change continuously along one direction. The gradual transition in material properties alleviates thermal mismatch problems experienced by cladded and coated components. The microstructure of FGM is usually heterogenous and the dominant failure mode of FGM is the crack initiation and propagation from the inclusions. The interface crack problem is studied by examining the asymptotic behavior of stress and displacement fields around the crack in FGM, and by comparing the results with known solutions for bimaterial systems. The focus is on characterizing the influence of material nonhomogeneity on the fracture parameters, and determining the fracture strength of FGM under quasi-static and dynamic loading.