In the composite system carbon fibre/magnesium alloy the interface reactivity was varied over a wide range by adding different amounts of the alloying element aluminium (alloys: AM20, AZ91) and by using carbon fibres of different surface properties (fibres: M40J, T300J). The structure and composition of interlayers in these composites down to the atomic scale as well as their effect on the mechanical properties were studied systematically by the combination of high-voltage electron microscopy, high-resolution electron microscopy, energy-dispersive X-ray spectroscopy and electron energy-loss spectroscopy with scanning electron microscope in situ bending tests, As resulting microstructure and nanochemistry correlate with the micromechanical fracture behaviour of the metal matrix composites, the interface reactivity can be used as a parameter governing the composite properties, In addition to precipitates of aluminium carbide, strongly influencing the fracture behaviour, there are also graphitic carbon ribbons and layers of nanocrystalline magnesium oxide at the fibre/matrix interface. Increasing the reactivity of the composite system, three characteristic modes of fracture behaviour are observed: single fibre pullout, bundle fracture (the optimum composite) and brittle failure.