In this paper, elastic-plastic deformation of a rotating hollow FGM cylinder is analytically studied based on small strain theory and for plane-strain state. Variation of elasticity modulus, density and yield stress are assumed to obey power-law functions of radial coordinate. Material was assumed to obey Tresca yield criterion and its associated flow rule. To evaluate and validate the presented analysis, numerical results were compared with previously published results for homogeneous and also FGM cylinder with constant density and yield stress, as two special cases. Then the effect of density and yield stress variation, which was not considered in the previous researches, was investigated on the elastic-plastic deformation of the FGM rotating cylinder. The results show that when the variation of density and yield stress is ignored, considerable differences may arise not only in the magnitude of computed radial displacement and stress and strain components, but also in predicting the pattern of yield initiation and also plastic zone development.