In recent years, the composition-gradient electrode material has been verified to be one of the most promising materials in lithium-ion battery. To investigate diffusion-induced stresses (DIS) generated in a cylindrical composition-gradient electrode, the finite deformation theory and the stress-induced diffusion hypothesis are adopted to establish the constitutive equations. Compared with stress distributions in a homogeneous electrode, the increasing forms of Young’s modulus E(R) and partial molar volume Ω(R) from the electrode center to the surface along the radial direction drastically increase the maximal magnitudes of hoop and axial stresses, while both of the decreasing forms are able to make the stress fields smaller and flatter. Also, it is found that the slope of -1 for E(R) with that of -0.5 for Ω(R) is a preferable strategy to prevent the inhomogeneous electrode from cracking, while for the sake of protecting the electrode from compression failure, the optimal slope for inhomogeneous E(R) and the preferential one for Ω(R) are both -0.5. The results provide a theoretical guidance for the design of composition-gradient electrode materials.