Fiber optic interferometric sensors were embedded in composite beams for structural health monitoring. The strain sensitivities were investigated for fiber optic Michelson sensor, extrinsic Fabry-Perot sensor and two mode elliptical core optical fiber sensor embedded in composites. The signal beating and drifting were appeared in the fiber optic Michelson signal. However such phenomena were not shown in the fiber optic extrinsic Fabry-Perot signal. The bending deformation and matrix cracking were investigated through four-point bending tests of cross-ply composite beams with the embedded fiber optic sensor. The failure instants of composite beams were detected using both a PZT sensor and a fiber optic sensor in order to investigate the fiber optic failure signals. The failure due to matrix cracks in a composite beam was confirmed by the edge replica method. The fiber optic failure signal acquired by AC triggering of digital storage oscilloscope were characterized by the time duration and maximum amplitude. The post-digital processing of the fiber optic signal was carried out to determine the strain and failure instants of composite beams. The failure instants were observed from the processed failure signal by high pass filtering. The initial failure strain of the composite beam was measured and processed from the fiber optic strain signal after low pass filtering. The passive demodulated fiber optic sensors, a 3x3 fiber optic Michelson sensor and a paired fiber optic Fabry-Perot sensor, were constructed to find the magnitude and direction of the strain from their fiber optic signals. The real-time digital processing algorithm, modified reference line crossing count method, was developed to determine the magnitude and direction of the strain from passive demodulated signals. The performance of this algorithm was tested by the fiber optic signals with beating, drifting and noise. The magnitude and direction of the strain were successfully determined from the passive demodulated fiber optic signals by this developed algorithm. The real-time operation of this algorithm for strain determination was verified by tensile test. Also, the acquisition algorithm of the high pass filtered fiber optic failure signals was programmed with LabVIEW virtual instrument. The operation of this data acquisition program was verified by the impact test of the cantilevered beam.