In this paper the effect of thermal expansion anisotropy on microcracking in ceramic matrix composites is studied. It is well known that thermal expansion mismatch and thermal expansion anisotropy in ceramic composites may induce residual stresses which in turn may cause microcracking, thus reducing the toughness of such materials. In this study it is assumed that the fiber and matrix materials are both thermally anisotropic, i.e. the coefficients of thermal expansion vary with direction. First an exact elasticity solution of the residual stress field generated due to thermal expansion anisotropy in and around a fiber embedded in an infinite matrix is presented. Next radial and interfacial microcrack propagation under the residual stress field is studied. A critical fiber size for microcrack suppression is also determined. Numerical results are obtained for various material combinations and thermal expansion anisotropy may have a significant effect on microcracking and toughness of ceramic composites.