Automated tape layup (ATL) has been used extensively for manufacturing composites laminates using unidirectional prepregs for high-performance industries like aerospace. Residual stress is one of the defects that adversely affect the layup quality. These stresses affect geometrical tolerances in the form of distortion of the final product and are found to have a detrimental impact on the mechanical properties. In-line monitoring of such defects will help in productivity increase and achieving a reliable process control. The aim of the present work is to demonstrate the feasibility of fiber Bragg grating sensors for monitoring residual strains. FBGs are embedded inside a thermoplastic UD laminate. Temperature and strain discrimination is performed to recognize intermittent residual strains during the layup. Finally, intermittent residual strain is used to develop an understanding of the global residual strain. Effect of selective process parameter on residual stress formation and the evolution of the same is also analyzed.