Polyacrylonitrile (PAN)-based activated carbon fibers were developed with the idea of increasing their potential and efficiency in industrial applications. The PAN-based fibers were first oxidized in air in a continuous multistage stabilization process, and then subjected to a continuous, low temperature carbonization and activation treatment in a mixture of steam and argon. The effect of the activation condition on the specific surface area, elemental composition, as well as the morphological structure of activated carbon fibers was studied. The surface area of the carbon fibers increased remarkably after the steam activation. It was found that steam activation promoted the elimination of nitrogen from the fiber. The bulk oxygen content of the fibers increased upon activation, probably due to formation of carbon-oxygen functionalities on the surface of the activated carbon fibers. The surface oxygen level of activated carbon fibers was greater than the bulk analysis of oxygen. It was observed that activation decayed the order of the carbon structure.