Damage in composite materials accumulates in a diffuse manner. Accounting for this damage in a progressive failure analysis requires an accurate measure of the degraded stiffness coefficients. This paper describes micromechanics models for predicting the effect of distributed cracks on the engineering properties (extensional moduli, shear moduli, and Poisson's ratios). Quasi-3D and 3D finite element methods were employed to determine the effective material properties of the cracked ply. Analyses were performed for various material systems, damage states, and adjacent (to the cracked ply) ply properties. The results show that the effective properties of cracked ply are very sensitive to the initial properties of a cracked ply. These properties are also found to be sensitive to the adjacent ply properties and orientation. However, they are not much affected by cracks in the adjacent plies. Relationships describing the sensitivity of the effective properties to the adjacent ply properties and the initial properties of a cracked ply were obtained. These relationships are useful for explaining the degradation behavior of laminates. Quantitative measures are presented for the errors introduced when shear-extension-coupling terms are ignored when calculating effective properties. Also, it was proven that transverse matrix cracks only affect the diagonal terms in the effective compliance matrix for certain configurations.