Based on the three-dimensional theory, this work presents a direct displacement method to investigate the free axisymmetric vibration of transversely isotropic circular plates, whose material is functionally graded and properties obey the exponential law along the thickness direction of the plate. Under two boundary conditions, the solution satisfies all basic equations and the corresponding boundary condition at every point. Thus, it is three-dimensional exact. Numerical examples are presented and compared with previous works. The present method can also be extended to the case of arbitrary distribution of the material properties along the thickness direction of the plate.