A functionally graded rare earth permanent magnet having a reduced eddy current loss in the form of a sintered magnet body having a composition R.sub.aE.sub.bT.sub.cA.sub.dF.sub.eO.sub.fM.sub.g is obtained by causing E and fluorine atoms to be absorbed in a R--Fe--B sintered magnet body from its surface. F is distributed such that its concentration increases on the average from the center toward the surface of the magnet body, the concentration of E/(R+E) contained in grain boundaries surrounding primary phase grains of (R,E).sub.2T.sub.14A tetragonal system is on the average higher than the concentration of E/(R+E) contained in the primary phase grains, the oxyfluoride of (R,E) is present at grain boundaries in a grain boundary region that extends from the magnet body surface to a depth of at least 20 .mu.m, particles of the oxyfluoride having an equivalent circle diameter of at least 1 .mu.m are distributed in the grain boundary region at a population of at least 2,000 particles/mm.sup.2, the oxyfluoride is present in an area fraction of at least 1%. The magnet body includes a surface layer having a higher electric resistance than in the interior. In the permanent magnet, the generation of eddy current within a magnetic circuit is restrained.