This paper presents the full generalization of the Cartesian coordinate-based higher-order theory for functionally graded materials developed by the authors during the past several years. This theory circumvents the problematic use of the standard micromechanical approach, based on the concept of a representative volume element, commonly employed in the analysis of functionally graded composites by explicitly coupling the local (microstructural) and global (macrostructural) responses. The theoretical framework is based on volumetric averaging of the various field quantities, together with imposition of boundary and interfacial conditions in an average sense between the subvolumes used to characterize the composite's functionally graded microstructure. The generalization outlined herein involves extension of the theoretical framework to enable the analysis of materials characterized by spatially variable microstructures in three directions. Specialization of the generalized theoretical framework to previously published versions of the higher-order theory for materials functionally graded in one and two directions is demonstrated. In the applications part of the paper we summarize the major findings obtained with the one-directional and two-directional versions of the higher-order theory. The results illustrate both the fundamental issues related to the influence of microstructure on microscopic and macroscopic quantities governing the response of composites and the technologically important applications. A major issue addressed herein is the applicability of the classical homogenization schemes in the analysis of functionally graded materials. The technologically important applications illustrate the utility of functionally graded microstructures in tailoring the response of structural components in a variety of applications involving uniform and gradient thermomechanical loading.