In this study, a thick hollow axisymmetric functionally graded (FG) cylinder is investigated for steady-state elastic stresses using an iteration technique and the finite element method. Here, we have considered a functionally graded cylinder tailored with the material property, namely, Young’s modulus, varying in an exponential form from the inner to outer radius of the cylinder. A mathematical formulation for stress analysis of functionally graded cylinder under internal and external pressure conditions is developed using constitutive relations for stress–strain, strain–displacement relations and the equation of equilibrium. The effect of the in-homogeneity parameter on radial displacement, radial and tangential stresses in a functionally graded cylinder made up of a High Carbon Steel (HCS) metal matrix, reinforced with Magnesium Oxide (MgO) ceramic is analyzed. The iterative method implemented is fast and converges to the solution which can be further improved by considering a higher number of iterations. This is depicted graphically by using radial displacement and stresses in a pressurized functionally graded cylinder obtained for the first two iterations. An iterative solution for non-FGM (or homogeneous material) is validated using the finite element method. The mechanical responses of the functionally graded cylinder obtained from the iterative method and the finite element method are then compared and found to be in good agreement. Results are presented in graphical and tabular form along with their interpretations.