A steady-state thermo-contact model of a rigid insulated cylinder of radius R sliding on a finite graded elastic layer is studied, whose Young’s modulus, thermal conductivity coefficient and thermal expansion coefficient vary exponentially in the thickness direction. The transfer matrix method and Fourier integral transform technique are used to obtain a Cauchy-type singular integral equation for the contact stresses. Numerical calculation yields the interface traction and temperature distributions below the rigid punch. It shows that crack damage in the finite graded layer due to the frictional sliding can be prevented by several alternative ways, such as decreasing the shear modulus ratio of the surface to the bottom, decreasing the friction coefficient, increasing the thickness of the finite graded layer, increasing the thermal conductivity coefficient ratio of the surface to the bottom or increasing the sliding velocity. The finding should be very useful for the design of novel graded materials with potential applications in aerospace, tribology, coatings, etc.