Inspired by biological systems in which damage triggers an autonomic healing response, a polymer composite material that can heal itself when cracked has been developed. In this paper we summarize the self-healing concept for polymeric composite materials and we investigate fracture mechanics issues consequential to the development and optimization of this new class of material. The self-healing material under investigation is an epoxy matrix composite, which incorporates a microencapsulated healing agent that is released upon crack intrusion. Polymerization of the healing agent is triggered by contact with an embedded catalyst. The effects of size and concentration of the catalyst and microcapsules on fracture toughness and healing efficiency are investigated. In all cases, the addition of microcapsules significantly toughens the neat epoxy. Once healed, the self-healing polymer exhibits the ability to recover as much as 90 percent of its virgin fracture toughness.