Carbon nanotubes (CNTs) were incorporated in an epoxy matrix that was then reinforced with carbon fibers. A fixed amount (0.5 wt.%) of different types of CNTs (functionalized and non-functionalized) were dispersed in the epoxy matrix, and unidirectional prepregs are produced. The key issues like CNT dispersion and its stability during the processing steps and the final mechanical properties of composites are discussed in detail. The temperature-viscosity profile of the epoxy matrix reinforced with different types of CNTs indicated a strong dependency on the type of CNTs. The pronounced effect of the presence of CNTs in the matrix is reflected by the decrease of the coefficient of thermal expansion by similar to 32% for the double-walled CNTs epoxy system. There is also a substantial increase in fracture toughness Mode-1 by over 80% for the pristine multi-walled CNTs in combination with the epoxy resin modified by using a compatibilizer. The influence of such CNT-resin modification also induced overall positive trends in all the mechanical properties that were evaluated. (C) 2009 Elsevier Ltd. All rights reserved.