The micromechanics of stress transfer is presented for the fibre fragmentation test of microcomposites containing debonded fibre-matrix interface and yielded matrix at the interface region. Results from the parametric study are discussed for carbon fibre composites containing epoxy and polyetheretherketone (PEEK) matrices, representing respectively typical brittle debonding and matrix yielding behaviour at the interface region. The stress transfer phenomena are characterized for the two interface failure processes. The sequence of interface failure and fibre fracture as a function of applied stress are also identified. Maximum debonded and yielded interface lengths are obtained above which a fibre will fracture into smaller lengths. There are also threshold fibre fragment lengths above which fibre will fracture without interface debonding or matrix yielding. The applied stresses for these conditions are governed by three strength properties of the composite constituents, namely interface shear bond strength, matrix shear yield strength and fibre tensile strength for given elastic constants of the fibre and matrix, and the geometric factors of the microcomposite. The ineffective length, a measure of the efficiency of stress transfer across the fibre-matrix interface, is shown to strongly depend on the extent to which these failure mechanisms take place at the interface region.