The objective of the proposed paper is to present a processing technique, test methods, experimental results, and manufacturing concerns related to mechanical performance of composite laminates with selective reinforcement using single walled carbon nanotubes (SWCNTs). Vacuum assisted resin transfer molding (VARTM) was used to fabricate woven carbon fabric-epoxy matrix composite laminates with localized placement of SWCNTs. The interlaminar shear strength of 8 harness satin weave carbon-epoxy composite was studied using short beam shear test and microscopy. The composites were manufactured with the nanotubes placed in the laminate mid-plane. Both pristine (non-functionalized) and functionalized SWCNTs were used in the mid-plane and compared to laminates without any nanotubes. The interlaminar shear strength was found to be improved by using functionalized nanotubes with little or almost no improvement for the case of the pristine nanotubes. Microscopic investigation of crack initiation and propagation is presented using results from optical and scanning electron microscopy.