Fiber optic sensor with small size, light weight and immunity to electromagnetic interference can be embedded and integrated into the host material to form a smart structure system. One must recognize that optical fibers are foreign entities to the host structure, therefore will alter the stress state in the vicinity of the embedded sensor irrespective of the small size of the fiber. This is a result of the material and geometric discontinuity introduced by the embedded optical fiber. In this study, the local stress fields in the vicinity of the embedded fiber are examined. The host material is considered to be a composite with reinforced fiber parallel to the optical fiber. The geometry in the vicinity of the embedded fiber is modeled by four concentric cylinders which represent the optical fiber, protective coating, resin and host material, respectively. In this investigation, the host structure is subjected to longitudinal normal stress and transverse hydro-static stress. The effects of the coating and host material on the stress distribution in the vicinity of the embedded optical fiber are presented through a parametric study.