Functionalized polyacrylonitrile (PAN) nanofibers were used in the present investigation to enhance the fracture behavior of carbon epoxy composite in order to prevent delamination if any crack propagates in the resin rich area. The main intent of this investigation was to analyze the efficiency of PAN nanofiber as a reinforcing agent for the carbon fiber-based epoxy structural composite. The composites were fabricated with stacked unidirectional carbon fibers and the PAN powder was functionalized with glycidyl methacrylate (GMA) and then used as reinforcement. The fabricated composites’ fracture behavior was analyzed through a double cantilever beam test and the energy release rate of the composites was investigated. The neat PAN and functionalized PAN-reinforced samples had an 18% and a 50% increase in fracture energy, respectively, compared to the control composite. In addition, the samples reinforced with functionalized PAN nanofibers had 27% higher interlaminar strength compared to neat PAN-reinforced composite, implying more efficient stress transformation as well as stress distribution from the matrix phase (resin-rich area) to the reinforcement phase (carbon/phase) of the composites. The enhancement of fracture toughness provides an opportunity to alleviate the prevalent issues in laminated composites for structural operations and facilitate their adoption in industries for critical applications.