This study presents an improved mathematical model to analyse the stress wave propagation in adhesively bonded functionally graded (FG) circular cylinders (butt joint) under an axial impulsive load. The volume fractions of the material constituents in the upper and lower cylinders were functionally tailored through the thickness of each cylinder using a power-law. The effective material properties of both cylinders, which are made of aluminum (Al) and silicon carbide (SiC), at any point were predicted by using the Mori-Tanaka homogenization scheme. In this improved model, the governing equations of the wave propagation include the spatial derivatives of local mechanical properties and were discretized by means of the finite difference method. The influence of these spatial derivatives and the compositional gradient exponent on the displacement and stress distributions of the joint was investigated. The material composition variations of both cylinders affected the displacement and stress fields whereas the compositional gradient exponent had a minor effect. The stress concentrations were alleviated in time, the displacement and stress distributions/variations around/along the upper and lower cylinder-adhesive interfaces were significantly affected by the adhesive layer. The spatial derivatives also affected the temporal histories of the displacement and stress components evaluated at the selected critical points of the upper cylinder, adhesive layer and lower cylinder. The consideration of the spatial local material derivatives provided a more accurate mathematical model of wave propagations through the graded layered structures.