Abstract: The numerical analysis and simulation of micro stress concentration for strengthened and toughened polymer-matrix composites are achieved by combining finite element method with homogenization theory at the location of macro stress concentration. The micro stress fields of composites are obtained for varying inclusion material properties and volume fractions. The distributions of stress concentration coefficients for radial stress, tangential stress, shear stress and Von Mises stress are displayed at the interface of inclusion. The failure modes of strengthened and toughened polymer-matrix composites are qualitatively analyzed.