A transient finite element simulation is developed for the two-dimensional thermoelastic contact problem of a stationary functionally graded material between sliding layers, with frictional heat generation. Thermoelastic instability in functionally graded materials is investigated. The critical speed of functionally graded material coating disk is larger than that of the conventional steel disk. The effect of the nonhomogeneity parameter in functionally graded material is also investigated. The results show that functionally gradient materials restrain the growth of perturbation and delay the contact separation.