SUMMARY Fatigue failure of metal matrix composite laminates is often preceded by a substantial loss of stiffness associated with cyclic plastic straining and subsequent low-cycle fatigue crack growth in the matrix. Experimental observations suggest that two principal crack patterns are involved; these are related here to the deformation modes predicted by the bimodal plasticity theory of fibrous composites. The relation is utilized in modelling the damage process such that matrix crack growth is regarded as a shakedown mechanism leading to a saturation damage state. For a given program of variable cyclic loading, evaluation of the saturation state is formulated as a non-linear optimization problem, where the total damage in a laminate is minimized subject to non-linear constraints derived from the ply yield criterion, hardening rule, and physically motivated bounds on the damage parameters. Effective elastic stiffness reduction and local stress redistribution predicted by the optimization procedure are compared with experimental measurements on several B/AI laminates. Stress transfer to and overloading of the fibres in certain plies appears to cause final fatigue failure of the laminate.