The relationship between the structure and mechanical properties of both polyacrylonitrile (PAN)and pitch-based carbon fibres has been studied in detail. Raman spectroscopic studies on the deformation of carbon fibres have shown that the rates of Raman band shift per unit strain, for both PAN- and mesophase pitch-based fibres, increase linearly with Young's modulus of the fibres. The shift rate for PAN-based fibres, however, was found to be almost twice that of mesophase pitch-based fibres of the same Young's modulus. To understand this difference, the microstructure of both types of fibre was examined using a combination of techniques, including scanning and transmission electron microscopy and Raman spectroscopy. The results demonstrate that there is a profound skin-core difference in PAN-based fibres, with more highly oriented and larger crystallites in the skin region, and less oriented and smaller crystallites in the core. In contrast, the mesophase pitch-based fibres show little change in microstructure across the fibre. The skin of the PAN-based fibres has a higher modulus than the core material. During deformation, this gives rise to a larger Raman band shift in the skin on the fibre than in the core, at the same level of overall strain.