In this work, based on the quasi-static tensile test and acoustic emission technology, the tensile properties of two types of three-dimensional flat-knitted inlay fabrics reinforced composites are investigated, and the acoustic emission characteristic parameters of various damage mechanisms are obtained. The transverse tensile process of specimens could be divided into the elastic stage, yield stage, and fracture stage. We found that, compared with the fluctuation of the stress-strain curve in the yield stage, weft insertion yarns in composite with interlock structure broke almost simultaneously, while the composite with plain stitch broke successively. The transverse and longitudinal tensile strength of the composite with interlock structure was 44.70% and 28.63% higher than the composite with plain structure, respectively. The SEM micrographs showed that the damage mechanism of the composites was matrix fracture, fiber-matrix debonding, and fiber breakage. The amplitude ranges of the three damage mechanisms were 50–65 dB, 65–80 dB, and 90–100 dB, respectively, and the frequency ranges were 35–114 kHz, 116–187 kHz, and 252–281 kHz, respectively. Fiber-matrix debonding and matrix fracture had large cumulative AE energy, numerous events, and long duration time, while fiber breakage had the characteristics of large amplitude, high frequency, low cumulative AE energy, few events, and short duration time.