Carbon fiber tensile properties increase with decreasing diameter. To produce relatively small diameter carbon fibers, multifilament tow precursor fibers were manufactured using an islands-in-a-sea bi-component spinning with polyacrylonitrile as the islands and poly(methyl methacrylate) as the sea. Fibers were stabilized and carbonized in a continuous process, with an effective diameter of 2.3 μm. These carbon fibers have a tensile strength and modulus as high as 5.1 GPa and 434 GPa, respectively and are up to 59% and 29% higher than the corresponding fibers processed in batch rather than by continuous stabilization and carbonization.