There has been a tremendous growth of utilizing automated tape placement (ATP) method to manufacture highly precise components for high end applications in aircrafts and next generation of space crafts. ATP has been widely adapted by major aircraft manufacturers for producing large structure, such as one-piece barrels, fuselage panels, or wing spars but this has not attained greater acceptance for production of smaller parts with complex and compact geometries. Above all identification of potential defects within the laminates is critical to ensure the quality of the final product. The quality of composite laminates fabricated using ATP depends not only on the bonding conditions between the laminates, but also on the structural integrity of laminate. The mismatch between the tape paths can cause non-uniform laminate thickness or formation of gaps or overlaps. These defects are usually caused by machine tolerances or steering of the tape. Consequently identifying them at earlier stages of manufacturing help the manufacturers to ensure the quality of final product. In this paper a novel method based on optical fiber Bragg grating (FBG) sensor is implemented for structural health monitoring of composite structures fabricated via ATP method. The results obtained through this study reveal that the embedded FBG sensors can be utilized for on-line process monitoring of composite lay-up, formation of residual stresses after consolidation, identification of common misalignments and the formation of gap during the lay-up. Finally an experimental demonstration of using FBGs towards the identification of cracks through the detection of acoustic emissions is presented.