Functionally graded polymer composites (FGPCs) were prepared by construction based layering method employing natural rubber (NR) as a matrix and carbon black (CB) in graded form. CB particles were graded along the rectangular geometry polymer matrix comprising the variation of particle volume fraction along thickness direction. These FGPCs were characterized through hysteresis measurements and compared with uniformly dispersed polymeric composites (UDPCs) maintaining the same average amount of filler. Dynamic mechanical properties of these FGPCs and UDPCs were also compared. Dynamic mechanical characterization revealed that FGPCs show much higher storage modulus than the corresponding UDPCs for any given combination of stacking sequence. Loss tangent of FGPCs was also observed to be lesser when compared to UDPCs leading to less hysteretic losses followed by lesser heat buildup in the composite. Hysteresis measurements accorded with the results of dynamic mechanical characterization. POLYM. ENG. SCI., 50:871-877, 2010. © 2009 Society of Plastics Engineers.