Carbon nanotube yarns (CNTYs) are hierarchical fibers with outstanding mechanical and electrical properties, with promising applications in the composite industry and as smart materials. In situ scanning electron microscopy observations are performed herein on individual dry-spun CNTYs during axial tensile testing in order to study their radial contraction response and structural changes. The CNTYs exhibited significant diameter reduction and untwisting due to the rearrangement of their fibrils during axial loading. In situ measurements of CNTY diameter reduction led to an exponential decrease of the radial contraction ratio with axial strain, with average values ranging between 5.43 and 1.08. The major failure mechanism was identified as fibril pull-out triggered by fibril slipping. The simultaneous stress and electrical resistance decay of CNTYs under axial tensile relaxation tests fit to a Wiechert's viscoelastic model using a Prony series. The rate of exponential decrease of the electrical resistance over time, however, is slower than that of the stress relaxation, indicating that additional charge carrier relaxation phenomena are present. Using the measured structural and material data input, a nonlinear analytical model based on classical theory of staple yarns is able to reproduce the mechanical response of the yarn. The model suggests that the most prominent parameters affecting the axial mechanical response of the CNTY are the radial contraction ratio, the slip factor, fibril radius, and fibril length.