Functionally graded materials (FGMs) offer significant potential for the tool and die industry, but limited research explores their use combining stainless steel and tool steel via additive manufacturing. This study focussed on immediate FGMs by using wire laser-based directed energy deposition to join H12 tool steel to 316 L stainless steel. Different sample orientations were produced and analysed to determine the joining effect on the microstructural and mechanical properties. Microstructural analysis revealed a dendritic structure, with martensitic needles observed in H12 regions near the build plate due to rapid cooling, while the 316 L regions displayed finer structures and more distinct melt pool boundaries. Higher amounts of dilution were observed in samples where tool steel was vertically deposited onto stainless steel, which occurred due to the higher temperature resulting from the lower thermal conductivity of stainless steel compared to tool steel. The horizontal samples had a distinctive zig-zag interface caused by the deposition strategy hierarchy. The tensile properties of vertical FGMs (yield strength of 203 MPa and ultimate tensile strength of 516 MPa and 536 MPa) closely matched those of as printed 316 L (yield strength of 238 MPa and ultimate tensile strength of 569 MPa), with all failures occurring in the ductile stainless steel region. Hardness measurements confirmed distinct regions, with the H12 regions averaging 704–807 HV0.3 while for the 316 L regions the hardness range is 196–208 HV0.3. These findings offer valuable insights to the tool and die industry on how deposition orientation and strategy can be designed to achieve desired outcomes.