It now appears generally accepted that the process of stress-induced orientation and graphitization of a thermoset-resin-derived matrix in a carbon-fiber/carbon-matrix (C/C) composite is principally a result of molecular orientation induced during the pyrolysis process as a consequence of the restraint of pyrolysis shrinkage at the fiber/matrix interface by attractive or frictional forces between fiber and matrix. We hypothesize that the critical factor for the formation of lamellar graphite (by subsequent high-temperature heat treatment), instead of fibrillar or isotropic glassy carbon, is a state of multiaxial deformation in the pyrolysis step. Finite-element stress analyses of the relative stresses in the regions of interfilament matrix, as the matrix pyrolyzes from polymer to carbon, reveal patterns of biaxial and triaxial stress consistent with experimental observations of lamellar graphite formation in the matrix by the techniques of optical microscopy, scanning electron microscopy, and transmission electron microscopy. The implications of localized matrix orientation and graphitization for C/C composite properties are discussed in terms of a “duplex” system of composite reinforcement. An example is presented showing crack deflection and blunting at the matrix/matrix-sheath interface produced as a result of such orientation and graphitization.