This paper presents a novel FE modeling approach based on Moving Mesh technique to reproduce crack propagation mechanisms in Functionally Graded Materials. The moving mesh is consistent with the Arbitrary Lagrangian-Eulerian formulation, which is suited to handle growing random cracks, avoiding extensive remeshing processes. This approach is based on the Interaction Integral Method to extract the mixed-mode Stress Intensity Factors, which are necessary to establish crack onset conditions and propagation direction. Among the different available options for FGM, the incompatibility formulation is adopted. The proposed scheme reproduces the propagation mechanisms by moving the computational nodes around the crack tip, according to standard fracture criteria. Mesh regularization technique based on proper rezoning equations ensures the consistency of the motion, reducing mesh distortion. The reliability of the proposed method is evaluated through comparisons with experimental data and existing numerical approaches. The computational efficiency is checked through parametric analyses on mesh discretization and accuracy in the prediction of the crack path and fracture variables. The results show how the proposed method could represent a valid tool to simulate the propagation mechanisms in FGM, in which heterogeneous macro-properties involve complex crack paths