This paper investigates the combined effects of stacking sequence and interlayer toughening on the mechanical response and failure modes of ±45° carbon fiber reinforced laminates, comprising experimental and numerical studies. Two material systems (T800H/3631, T800S/3900) and three stacking sequences (4 double plies, 4 plies, 8 plies) have been analyzed. Digital Image Correlation (DIC) and a high resolution edge camera were utilized to capture the intricate crack patterns in each ply. This paper also addresses the challenge of the nonlinear in-plane shear characterization of the lamina, and proposes an amendment to the existing ASTM standard to obtain the in-situ non-linear response and the lamina shear strength with the consideration of residual stresses. The complex progression of micro-damage, matrix cracks and delamination as well as the final two-piece failure were captured by the enhanced semi-discrete damage modeling (eSD2M) framework. A parametric study was performed to reverse-engineer the most critical parameters such as interlayer strengths and toughnesses. The obtained values reflect the difference in the interlayer composition between the two material systems.