This research explores the development and characterization of a hybrid thermoplastic composite system composed of carbon fiber reinforced Polyaryletherketone (PAEK) prepreg with centrally embedded Invar 36 metal sheets. Designed for cryogenic fuel storage and aerospace applications, the hybrid aims to enhance dimensional stability, reduce thermal expansion, and improve impact resistance under extreme conditions. Fabrication was performed using a hot-press molding technique, supplemented by plasma surface treatment to improve interfacial adhesion between the carbon fibres and metal layers. Mechanical and thermal characterization was conducted through three-point bending, cryogenic flatwise tensile testing, drop-weight impact, Thermogravimetric Analysis (TGA), Differential Scanning Calorimetry (DSC), Thermomechanical Analysis (TMA), and surface analyses using SEM and Laser Confocal Microscopy (LCM). Water contact angle measurements were used to evaluate surface wettability improvements post plasma treatment. Results showed that the hybrid composite withstood thermal degradation up to 853 K, with an earlier onset at 838 K surpassing the CFRP-only laminate. Flexural tests indicated improved peak load (1194.7 N) and energy absorption. Under cryogenic impact at −196 °C, the hybrid showed a faster, more ductile response, absorbing 2712 N at 1.60 ms. Critically, TMA data confirmed a measurable reduction in the coefficient of thermal expansion in the hybrid, validating its enhanced dimensional stability. SEM and LCM analysis revealed fewer microcracks and delamination in hybrid samples, supporting improved structural integrity. In conclusion, the integration of Invar 36 sheets into a thermoplastic CFRP matrix demonstrably improves thermal endurance, dimensional precision, and damage tolerance, offering a robust material solution for next-generation cryogenic and aerospace applications.