This article examined the thermoelastic behavior of functionally graded (FG) materials using a partially modified thermoelastic heat transfer model. The model utilized the three-phase lag thermoelasticity theory and incorporated higher-order fractional derivatives of Caputo and Fabrizio to address advanced thermodynamic and mechanical properties. These improvements showed great potential for applications in engineering fields such as aerospace, pressure vessel design, and structural engineering. The study applied the proposed model to analyze a thermoelastic problem involving an infinite FG medium with a cylindrical cavity subjected to thermal shock. The medium’s radially varying thermal and mechanical properties, characteristic of FG materials, played a central role in the analysis. The results revealed that the gradient coefficient and fractional derivative coefficient significantly affected the distribution of physical fields within the medium. Adjusting these parameters optimized the thermoelastic response, enabling tailored performance to meet specific engineering requirements.