Carbon nanofibers (CNFs) are plasma etched by using cold plasma of air and helium for different time durations. Changes in surface functional groups of CNFs due to plasma treatment were estimated by using elemental analysis and temperature programmed decomposition in helium atmosphere. The influence of plasma etched CNFs on the toughness of epoxy and tensile and flexural strength of carbon-epoxy composites have been studied. Results indicate that, air plasma etched CNFs can improve the toughness of epoxy, while helium plasma etched CNFs could not impart improved toughness to epoxy composites. On the other hand, mechanical properties of carbon-epoxy made with air plasma etched CNFs improved significantly as compared to helium plasma etched CNFs as well as untreated CNFs. © 2015 Copyright © Taylor & Francis Group, LLC.