Electrospun functionalized polyacrylonitrile grafted glycidyl methacrylate (PAN-g-GMA) nanofibers are incorporated between the plies of a conventional carbon fiber/epoxy composite to improve the composite's mechanical performance. Glycidyl methacrylate (GMA) is successfully grafted onto polyacrylonitrile (PAN) polymer powder via a free radical mechanism. Characterization of the electrospun PAN and PAN-g-GMA nanofibers indicates that the grafting of GMA does not significantly alter the tensile properties of the PAN nanofibers but results in an increase in the diameter of nanofibers. Statistical analysis of the mechanical characterization studies on PAN-carbon/epoxy hybrid composites conclusively shows that the composite reinforced with functionalized PAN nanofibers has greater mechanical properties than that of both the neat PAN nanofiber enriched hybrid composite and control composite (without nanofibers). The improved performance is attributed to the grafted glycidyl groups on PAN, leading to stronger interactions between the nanofibers and the epoxy matrix. PAN-g-GMA nanofiber reinforced composite outperforms their neat PAN counterparts in tensile strength, short beam shear strength, flexural strength, and Izod impact energy absorption by 8%, 9%, 6%, and 8%, respectively. Compared to the control composite, the improvements resulting from the PAN-g-GMA nanofiber incorporation are even more pronounced at 28%, 41%, 32%, and 21% in the corresponding tests, respectively.