The microstructure, tensile properties, and thermal expansion characteristics of a laser powder bed fusion (LPBF) manufactured compositionally graded composite with 0.5–8 wt% yttria‐stabilized zirconia (YSZ) reinforced Inconel 718 are investigated. Along the composition gradient, which is perpendicular to the build direction, in all cross sections, the YSZ segregates at the melt‐pool boundaries and the IN718 matrix has randomly oriented equiaxed grains. Cross sections with >2 wt% YSZ contain significant porosity (>2%) and solidification cracks, which reduces their strength and ductility significantly. In the section with 1.5 wt% YSZ, the YS, UTS, and ductility are 819 ± 30, 1008 ± 40, and 7.4 ± 0.4 MPa, which matches well with that of LPBF fabricated YSZ‐free IN718. Dilatometry measurements on sections with 0.5–1.5 wt% YSZ in the temperature range of 25–1200 °C indicate that their coefficient of thermal expansion (CTE) is intermediate to that of IN718 and YSZ. Finally, the variations in CTE with temperature are discussed in detail by considering the microstructural evolution in the composite with changes in temperature.