Abstract A refined shear deformation theory for free vibration of functionally graded plates on elastic foundation is developed. The displacement field is chosen based on assumptions that the in-plane and transverse displacements consist of bending and shear components, and the shear components of in-plane displacements give rise to the parabolic variation of shear strain through the thickness in such a way that shear stresses vanish on the plate surfaces. Therefore, there is no need to use shear correction factor. Material properties of functionally graded plate are assumed to vary according to power law distribution of the volume fraction of the constituents. The elastic foundation is modeled as Pasternak foundation. Equations of motion are derived using Hamilton’s principle. Closed-form solution of rectangular plates is derived, and the obtained results are compared well with three-dimensional elasticity solutions and third-order shear deformation theory solutions. Finally, the influences of power law index, thickness ratio, foundation parameter, and boundary condition on the natural frequency of plates have been investigated.