Human tibia, the second largest bone in human body, is made of complex biological material having inhomogeneity and anisotropy in such a manner that makes it a functionally graded material. While analyses of human tibia assuming it to be made of different material regions have been attempted in past, functionally graded nature of the bone in the mechanical analysis has not been considered. This study highlights the importance of functional grading of material properties in capturing the correct stress distribution from the finite element analysis (FEA) of human tibia under static loading. Isotropic and orthotropic material properties of different regions of human tibia have been graded functionally in three different manners and assigned to the tibia model. The nonfunctionally graded and functionally graded models of tibia have been compared with each other. It was observed that the model in which functional grading was not performed, uneven distribution and unrealistic spikes of stresses occurred at the interfaces of different material regions. On the contrary, the models with functional grading were free from this potential artifact. Hence, our analysis suggests that functional grading is essential for predicting the actual distribution of stresses in the entire bone, which is important for biomechanical analysis. We find that orthotropic nature of the bone tends to increase the maximum von Mises stress in the entire tibia, while inclusion of cross-sectional inhomogeneity typically increases the stresses across normal cross section. Accordingly, our analysis suggests that both orthotropy as well as cross-sectional inhomogeneity should be included to correctly capture the stress distribution in the bone.