Toughness in Ceramic Matrix Composites (CMCs) is achieved if crack deflection can occur at the fiber/matrix interface, preventing crack penetration into the fiber and enabling energy-dissipating fiber pullout. To investigate toughening in nanoscale CMCs, direct atomistic models are used to study how matrix cracks behave as a function of the degree of interfacial bonding/sliding, as controlled by the density of C interstitial atoms, at the interface between carbon nanotubes (CNTs) and a diamond matrix. Under all interface conditions studied, incident matrix cracks do not penetrate into the nanotube. Under increased loading, weaker interfaces fail in shear while stronger interfaces do not fail and, instead, the CNT fails once the stress on the CNT reaches its tensile strength. An analytic shear lag model captures all of the micromechanical details as a function of loading and material parameters. Interface deflection versus fiber penetration is found to depend on the relative bond strengths of the interface and the CNT, with CNT failure occurring well below the prediction of the toughness-based continuum He-Hutchinson model. The shear lag model, in contrast, predicts the CNT failure point and shows that the nanoscale embrittlement transition occurs at an interface shear strength scaling as tau similar to epsilon(f),CNT sigma CNT, rather than tau s similar to sigma CNT typically prevailing for micron scale composites, where epsilon f,CNT and sigma CNT are the CNT failure strain and stress, respectively. Interface bonding also lowers the effective fracture strength in SWCNTs, due to formation of defects, but does not play a role in DWCNTs having interwall coupling, which are weaker than SWCNTs but less prone to damage in the outerwall. (C) 2013 Elsevier Ltd. All rights reserved.