In this work an attempt is made to identify damage mechanisms in carbon/epoxy composites using acoustic emission technique under fatigue loading. Acoustic emission characteristics of fiber breaks and matrix cracking are identified on the basis of Peak Amplitude (PA) and Event Duration (ED). This has been achieved by conducting tests on specially designed specimens in which one type of damage is expected to be predominant. Acoustic emission data was analysed using histogram and point plot procedures. It is observed that the damage based on acoustic emission studies does not correlates with the damage indicated by reduction in fatigue modulus. The rate of fiber breaks and matrix cracking based on acoustic emissions are compared to micrographs taken at various stages of loading. As the number of cycle increases, it is observed that either there is an increase in the rate of fiber breaks and a corresponding decrease rate of matrix cracking or an increase in the rate of matrix cracking and corresponding decreasing rate of fiber breaks. A sudden increase in number of matrix cracks per cycle is observed when the damage reaches a critical stage after which damage grows rapidly to failure.