In non-destructive health monitoring of composite materials optical sensors have been shown many advantages compared to the piezoelectrical transducers and electrical strain gauges. Some of their properties include light weight, tiny structures, remote sensing, electro-magnetic interference, and more importantly they are immune to any hazardous environment, particularly they can withstand a high temperatures up to over 1000° C, and they are immune to electro-magnetic interference. They can be easily embedded inside the materials like composites with minimum effect on their original structure. The light weight of composite materials makes optical sensors embedded in composite package very suitable for many applications including airspace industry. The composite packages can be tailored to achieve desired mechanical characteristics. Moreover, they can be applied as extra protection for embedded fiber optics. In this work, phase-modulated sensor, Michelson interferometer, was fabricated and embedded in composite package. Then the package was glued on an aluminum substrate. The resultant structure was used to measure strain in the aluminum substrate. The comprehensive study was performed in evaluating different lay-ups of the composite package in order to find the best match between the composite materials and the substrate in term of stiffness. ANSYS simulations were performed to study the influence of the resin pocket on the strain transmission to the optical sensor, dependence of the thickness of the adhesive layer on the strain readings on the composite package and on the optical sensor. The results of the simulations showed that optical sensor within resin pocket created by the resin and carbon fiber will give small alteration in strain readings between composite material and optical fiber. Static tensile tests were investigated on different lay-ups of the laminate, adhesives, composite materials, and thickness of the adhesive layers. Difference in strain readings between aluminum and optical sensor were smaller due to good transmission of the strain through epoxy adhesive layer with thickness a 100 om. The most successful lay-ups for composite package were [90/90/F(0)/90/90] for CYCOM5276-1 and for NCT301- [ 90/90/F(0)/90/90] and [-60/60/F(0)/60/-60]. The results showed that composite packages with less stiffness in x direction demonstrated better performance