To improve the transverse properties of fiber-reinforced metal matrix composites, a three-phase material model was proposed. In the model the reinforcing fibers are surrounded by a weak metal matrix, which in turn is encircled by another strong metal matrix. The weak matrix acts as a role to protect the fibers from damage and the strong matrix acts as a role to improve the transverse properties of the composite. Based on the material model, FEM model was established and parameter analysis was carried out to determine the influence of matrix strengths and fibers spatial distribution on the transverse mechanical behavior of the three-phase composite. It was found that the yield strength of the three-phase composite was mainly dictated by the matrix directly surrounding fibers and the effect from another matrix on the yield strength can be neglected. The three-phase composite has a higher transverse strength with hexagonal fiber arrangement than with regular square fiber arrangement.