The merge of materials science with the biological sciences has produced some advanced materials which are called functionally graded materials (FGMs) in order to provide the desired material characteristics. The FGMs concept originates in Japan in 1984 during the space plan project. FGMs are materials or structures in which the material properties vary with location in such a way as to optimize some functions of the overall FGMs. It is well known that the main inorganic component of natural bone is hydroxyapatite (HAP) and that the main organic component is collagen (Col). Hydroxyapatite HAP implants are not bioabsorbable, and because induction of bone into and around the artificially made HAP is not always satisfactory, loosening or breakage of HAP implants may occur after implantation in the clinical application. The development of a new material which is bioabsorbable and which has osteoconductive activity is needed. Therefore, the aim of the current investigation is to design an implant, in the presence of cancellous bone as a thin layer around it, from functionally graded material. In this study, a novel biomaterial, collagen/hydroxyapatite (Col/HAP) as a functionally graded material (FGM), was developed using the finite element and optimization techniques which are available in the ANSYS package. These materials have a self-organized character similar to that of natural bone. The investigations have shown that the maximum stress in the cortical bone and cancellous bone for the Col/HAP functionally graded implant has been reduced by about 40% and 19% respectively compared to currently used titanium dental implants.