Structures often consist of composite members containing holes or notches. Since stress concentrations associated with such geometric discontinuities can decrease strength, there is desire to minimize stress concentrations. This article demonstrates ability to reduce tensile stress concentrations in perforated composites by synergizing a finite-element program with a feasible-direction method to optimize fiber directions locally, i.e., form a functionally graded material. Optimization is conducted under constraints on the maximum stress in the structure. In addition to reducing the tensile stress concentration beyond that achieved by previous methods, the current approach is compatible with contemporary processing techniques.