Progressive fractures of laminated graphite/epoxy composite cylindrical shells are investigated under external hydrostatic pressure. An integrated computer code is used for the simulation of composite structural degradation under loading. Damage initiation, growth, accumulation, and propagation to structural fracture are included in the simulations. Results indicate that local defects do not have a significant effect on structural survivability under hydrostatic loading for thick composite shells. Influence of constituent material properties and the effects of residual stresses on damage initiation and progression under external pressure are evaluated. Structural safety and damage tolerance characteristics of a prototype composite cylindrical shell are examined.