Abstract We investigate the polarization and dielectric properties of ferroelectric BaTiO3 thin film grown compositionally graded substrate by using first-principles method. Due to the spatial variation of the misfit strain between film and substrate, the polarization in the film decreases gradually along x direction of the film. Moreover, localization of the polarization also results in large spatial variation of the dielectric constant in the ferroelectric thin film. Our results suggest that such interesting properties of ferroelectric thin films can be controlled by choosing appropriate compositionally graded substrates.