The influence of embedding a titanium alloy sensor tube in carbon fiber-reinforced polymer (CFRP) composite laminates on the in-plane compressive strength has been presented. These sensor tubes cause geometric disturbances in fiber architecture and lead to formation of resin pockets which are considered as defects and were characterized with help of an optical microscope. These cylindrical tubes were embedded at 0 degree and 90 degree orientations with respect to the fiber direction and their impact on the compressive strength was studied experimentally and analytically for three different stacking sequences. Digital Image Correlation (DIC) was employed for strain mapping around the sensor region and to capture the onset of failure. Finite element analysis was used to evaluate stress concentrations present due to sensor and to investigate the effect of residual curing stresses. Progressive failure was performed using different failure criteria to verify the experimental testing results with analysis. Reduction of 5.31% was observed for a cross-ply laminate experimentally, the ultimate failure strength was predicted for the same using progressive failure to an accuracy of plus/minus 3%.