This paper investigates the problem of the functional interval observer design for linear time-varying (LTV) systems with additive disturbances in both input and output channels. First, sufficient conditions for the existence of a functional interval observer for LTV systems are proposed. Based on the solution of a type of Sylvester matrix equations (generalized Sylvester equations, GSEs), completely parameterized expressions of functional interval observer coefficient matrices are established, yielding a simple and effective design approach for solving the interval estimation issue of the LTV system, while the free parameters in the expressions provide the design degrees of freedom that can be utilized to achieve additional system specifications. Furthermore, the developed observer may execute state estimation at the desired convergence rate, considerably improving estimate performance. Finally, a numerical example and a back-to-turn (BTT) aircraft control example are presented, with the results showing that the upper and lower bounds provided by the designed observer provide a better performance of interval estimation of the functional state variables, demonstrating the effectiveness of the proposed method.