Self-healing composites are smart materials that can self-detect and prevent micro crack propagation and any catastrophic failure in the composite structure. In this study, dicyclopentadiene (DCPD) monomer was encapsulated with urea formaldehyde (UF) by in situ polymerization. These microcapsules were mixed with epoxy, chopped carbon fiber (CF), and multi-walled carbon nanotubes (CNT) to make self-healing composite. Both microcapsules and the composite specimens were extensively tested for their physical, thermal, and mechanical properties. The average diameter and shell thickness of the microcapsules were 268 µm and 805 nm, respectively. DMA analysis suggested that the microcapsules have a glass transition temperature (Tg) of 85°C. FTIR analysis confirmed the presence of CF, multi-walled carbon nanotubes (MWCNT), and other constituents in the composite. The tensile strength of the self-healing composites was tested as per ASTM standards. The incorporation of MWCNT in the composites has significantly improved the tensile strength of the composite without compromising on the self-healing efficiency (90%) compared the unmodified samples (72%). The encouraging results of higher glass transition temperature (85°C) combined with an improved healing efficiency (90%), can be considered as the novelties of this work. As the test results of microcapsules and composite specimens were encouraging, they can find applications in making composite structures for aerospace, windmills, and marine applications. The experimental observations and test results are discussed in detail.