The objective of this investigation was to develop, process, and test hybrid nano/microcomposites with nano-reinforced matrix and demonstrate an enhancement in thermomechanical properties, with emphasis on damage tolerance measured in terms of fracture toughness, impact damage, residual strength, and fatigue life. The material investigated was carbon fabric/epoxy with the matrix reinforced with multi-walled carbon nanotubes (CNTs). A solvent-based method with a dispersion enhancing block copolymer was used to prepare composites with and without CNTs. It was first shown that CNT reinforced composites have higher matrix dominated properties, such as compressive modulus and strength, in-plane shear modulus and strength, interlaminar shear strength, and interlaminar fracture toughness. The composite with 0.5 wt% of CNTs showed noticeably improved resistance to indentation damage by about 16% and increased damage tolerance in terms of residual compressive strength by about 35% over the composite without nanotubes. A significant enhancement was also shown under interlaminar fatigue testing with fatigue lives an order of magnitude longer than those of the reference material. The high increase in fatigue life was related to an increase in static interlaminar shear strength, the logarithmic dependence of the fatigue-life (S-N) curves, and an increase in interlaminar fracture toughness.