The objective of this work was to study the effect of addition of Poly tetramethylene ether glycol (PTMEG) on the mechanical and flame retardance behaviour of novolac phenolic/carbon fiber composites (NPCC). The miscibility of PTMEG and novolac phenolic resin was studied using DSC. Both modified and unmodified novolac phenolic resins were characterised for chemical structure using FTIR. The 8 wt% PTMEG/NPCC yielded 39 % increase in impact strength compared to that of unmodified NPCC. Void content of the composites were measured. Both NPCC and PTMEG blended NPCC were tested for tensile strength (UTS), flexural strength (FS), inter laminar shear strength (ILSS) and impact strength. Also morphological studies were carried out using SEM. The UTS, FS, ILSS and impact strength of the modified NPCC showed better results at 8 wt% of PTMEG without any compromise on the flame retardancy. The fracture surface examination showed good adhesion between the fiber and the matrix in the modified NPCC.