The fibres produced by the internal crystallization method can now be used in a variety of metal, intermetallic and ceramic matrices. The microstructure of the Al₂O₃–Al₅Y₃O₁₂ eutectic fibres produced by an internal crystallization route varies with variations of initial melt composition and crystallization conditions. Deviation of the composition from the eutectic point yields formation of dendrites in the microstructure. The eutectic microstructure of the fibres appears to be characterized by a rather large disorientation. Qualitative correlation between the failure stress of a fibre and the appearance of the fibre surface is revealed. Coating the fibres with a silicon oxy-carbide layer enhances the fibre strength, certainly as a consequence of the healing of defects. Strength characteristics of the fibres can be widely controlled by changing fabrication parameters as well as by the application of coatings.