The co-deposition of multiple powder feedstocks during metal additive manufacturing (AM) can be used to fabricate materials with spatially dependent properties, which can be engineered to contain different functionalities (i.e., functionally integrated materials, FIMs). Although the transition region that forms between dissimilar materials has been studied in detail, the influence of co-deposition on the resultant spatial phase distribution and associated mechanical behavior has heretofore not been reported. In this study, FIM samples transitioning from stainless steel (SS) 316 L to Haynes 282 Ni-based superalloy were deposited via directed energy deposition (DED). The FIM samples were compared to baseline, homogeneous single-alloy deposited samples using digital image correlation during tensile testing, together with microscopy, energy-dispersive X-ray spectroscopy, electron backscattered diffraction, and thermodynamic modeling, to assess the performance of different co-deposition strategies. Each FIM sample exhibited a compositionally and microstructurally unique transition region from SS 316 L to Haynes 282, which was found to have implications on the strain localization across the transition region during uniaxial tensile loading. Finer step sizes in co-deposition were found to minimize strain localization by avoiding sharp compositional interfaces in the transition region.