In the present research an Fe–Fe3Ni functionally graded material has been fabricated using an innovative wire-arc additive manufacturing process. Considering the residual bcc-α-Fe in the bulk material, a homogenization heat treatment is conducted to the as-fabricated alloy to transform the residual bcc lattice into fcc structure. During the entire heat treatment, the phase evolution process in Fe–Fe3Ni functionally graded material is in-situ characterized using the high-intensity neutron diffraction instrument WOMBAT, therefore the temperature profile is set linear to accurately extract phase volume fractions and thermal lattice strains in the specific regions. According to the results, the as-fabricated functionally graded material contains both fcc-Fe3Ni and bcc-α-Fe, while after heat treatment the bcc-α-Fe is dissolved into the Fe3Ni matrix and leads to lower hardness in the alloy. Also, the detected phase evolutions are mainly performed by the low Ni content section of the Fe–Fe3Ni functionally graded material. In addition, compared to the bcc lattice in the as-fabricated functionally graded material, the dissolved Fe more considerably restraint the Fe3Ni lattice deformation thus a much lower thermal expansion coefficient is measured from cooling than the heating process.