Microfibrillated cellulose (MFC) was successfully prepared from lyocell fibers using combined homogenization and sonication treatments. MFC fibrils with a mean diameter of ~365 nm were observed, after the lyocell fibers with diameters of ~10 μm were mechanically treated for 60 min. Poly (vinyl alcohol) (PVA) composites reinforced with MFC were then fabricated using a solvent casting method. Physical and mechanical properties of the MFC reinforced PVA composites were investigated. An increase of ~13 and ~34 % of tensile strength and Youngs modulus was observed for the 3 wt% MFC reinforced composites, compared to those of the pure PVA. Raman spectroscopy was also employed to study the deformation micromechanics of the MFC reinforced PVA composites. The position of the Raman peak initially located at 1095 cm^-1, corresponding to the C-O ring stretching and C-O-C glycosidic bond stretching modes, was recorded. During tensile deformation, this peak was observed to shift towards a lower wavenumber position, indicating stress-transfer between the resin and the fibrils.