High-resolution transmission electron microscopy examination of carbon nanotube-polyacrylonitrile composite fibers synthesized by electrospinning was conducted. Both single-wall carbon nanotubes and multi-wall carbon nanotubes have been used to reinforce the polymer fibers. A two-stage rupture behavior of the composite fibers under tension, including crazing of polymer matrix and pull-out of carbon nanotubes, has been observed. Carbon nanotubes reinforce the polymer fibers by hindering crazing extension, reducing stress concentration, and dissipating energy by pullout. Distribution of nanotubes in the polymer matrix and interfacial adhesion between nanotubes and polymers are two major factors to determine the reinforcement effect of carbon nanotubes in polymer fibers. (C) 2004 American Institute of Physics.