Functionally Graded Material (FGM) concept is used to make a new type of tool where the composition of the base materials for small cross-sections would change significantly layer by layer to withstand high surface temperatures and pressures. In this research work, a FGM single point cutting tool has been compared with that of a conventional High Speed Steel (HSS) cutting tool of the same dimensions and the comparative performance results have been investigated. The tool and the AISI D2 Tool Steel workpiece have been specifically designed based on the required function of the workpiece and also based on the different applications that the tool will be subjected to providing better efficiency results with less tool degradation. The individual parts have been designed, meshed and each assembly has been analyzed in Abaqus 6.14 considering the effect of speed and depth of cut of the tool with respect to the workpiece. The chip formation, Von Mises Stress and strain energy on the chip tool interface is analysed for both the tools. The results from the analysis show that FGM provides better performance and enhances the surface characteristics with less wear. Also the FGM tool was fabricated and was studied for its morphology and characteristics.