A joint experimental and modelling study of plastic strain and ensuing damage in a novel metal matrix composite (Fe-TiB2) is presented. Damage is observed and quantified using SEM images processing and Acoustic Emission (AE) analysis. The use of AE confirms that the surface damage observed is strongly correlated to damage in the bulk of the material. The primary mode of damage is particle fracture. Very little particle decohesion is observed, indicating an exceptionally good cohesion of the steel/particle interface. Damage is initiated soon after the composite yield point is reached and increases significantly with strain. Macroscopic failure of the tensile specimen occurs when about 25% of the particles are fractured. This corresponds to about 21% engineering strain. Using in-situ SEM tensile tests with quantitative digital image correlation (DIC), full-field strain measurements are obtained and particle fracture quantified. The results of fields measurements are compared to results of a FFT based homogenization method with boundary conditions retrieved from the experiment. A good agreement is found between the DIC-measured and FFT-predicted results. Estimated values of the particle fracture stress are obtained.