Microfibers and nanofibers were prepared from macro banana fibers by a steam explosion process. The fiber surface of chemically modified and unmodified banana fibers was investigated by atomic force microscopy, the studies revealed a reduction in fiber diameter during steam explosion followed by acid treatments. Zeta potential measurements were carried out to measure the acidic property of the fiber surface; the surface acidity was found to be increased from macrofibers to nanofibers. The thermal behavior of macrofibers, microfibers, and nanofibers were compared. Substantial increase in thermal stability was observed from macroscale to nanoscale, which proved the high thermal stability of nanofibers to processing conditions of biocomposite preparation. The composition of the fibers before and after steam explosion and acid hydrolysis were also analyzed using FT-IR. It was found that the isolation of cellulose nanofibres occurs in the final step of the processing stage. Further macrocomposites, microcomposites, and nanocomposites were prepared and mechanical properties such as tensile, flexural and impact properties were measured and compared. The composites with small amount of nanofibers induces a significant increase in tensile strength (142%), flexural strength (280%), and impact strength (133%) of the phenol formaldehyde (PF) matrix, this increase is due to the interconnected web like structure of the nanofibers.