The growing demand for sustainable composite materials calls for a deeper understanding of the mechanical behavior of Polylactic Acid (PLA) composites under specific environmental conditions, an area that remains largely unexplored. This study addresses this gap by developing and validating a Finite Element Model (FEM) to accurately simulate stress strain distribution and in additively manufactured PLA composites reinforced with continuous carbon fiber embedded with FBG sensors. The mechanical behavior of as-printed specimens was compared to that of specimens after thermal exposure in the 10–50 °C range. Thermal exposure improved overall mechanical performance increasing tensile strength and failure strain due to enhanced fiber-matrix adhesion and better fiber wet-out, even though PLA matrix material experienced thermally induced degradation. Scanning electron microscopy (SEM) and Hashin damage modeling revealed fiber tensile fracture as the dominant failure mechanism in both as-manufactured and after thermal exposure specimens. The FEM implemented in ABAQUS and Arrhenius-based matrix degradation, accurately reproduced the experimental stress–strain responses in both conditions. These findings demonstrate the effectiveness of combining composite damage modeling with experimental strain data to reliably monitor structural health. This integrated approach offers important implications for the design and structural health monitoring of additively manufactured composites.