Joining of dissimilar materials such as metals and polymeric composites using bolting, riveting or adhesive joining results in abrupt change in mechanical properties at the joints causing stress concentration. Structural health of a hybrid metal-composite structure can be compromised by factors such as environmental degradation of adhesive or galvanic corrosion at the metal-composite joints. To solve these issues, metal-composite joints with textile mesostructure have been developed with hybrid carbon/steel fiber textile composites. The hybrid composites are tested under quasi-static tensile loading to study macro-mechanical properties and evolution of microdamage. Two configurations of woven hybrid composites are chosen for FE modeling of damage development. 3D representative volume elements are built such that resin-impregnated yarns are modelled as homogeneous orthotropic materials, and yarn/matrix-interface behavior is characterized by cohesive zone material modeling. During mechanical test simulation, stress-strain curves are plotted and damage schematics inside yarns and matrix are obtained. The FEM predictions match the experimental results of microdamage evolution, but they underestimate the experimental tensile strength values for hybrid composite configuration with stainless steel-fiber yarn in the warp-direction and carbon-fiber yarn in the weft-direction.