This work investigates the fabrication of microholes in carbon-fiber-reinforced polymer (CFRP) composite by powder-mixed microelectrical discharge drilling (PMμEDD) method. Initially, pilot experiments were carried out to understand the effect of powder concentration on the machining time and material removal mechanism. Then the full-factorial experimental analysis was performed to investigate the micromachining performance of CFRP composite. The input factors considered for the full-factorial analysis were powder concentration (2, 4, and 6 g/L), capacitance (100, 1000, and 10,000 μF), and tool rotation (300, 400, and 500 rpm). The regression analysis was carried out to assess the significance of the chosen input factors. The surface morphology of the fabricated microhole was extensively studied to establish the material removal mechanism and failure mechanisms of the composite constituents.