During service exposure, composite structures may be subjected to local heating under which three-dimensional temperature gradients may develop with temperature differences that can exceed 150°C. The different thermal expansion that is associated with such temperature gradients can generate a range of thermal stresses such as compressive thermal stresses around the periphery of the heated zone, leading potentially to delamination. In this article the combined effects of nonuniform heating and moisture in glass- and carbon fiber-reinforced epoxy laminates are presented, detailing the results of the effect of moisture on the mechanical properties, the simulation experiments of nonuniform heating including in situ measurement of temperatures and strains, and a schematic model of the observed delamination by bulging. The main conclusion is that delamination damage in a form of bulging occurs only in the presence of a threshold level of moisture of about 1 wt%. This threshold level corresponds to the critical moisture content found to produce major mechanical property reduction and interlamina separation. The proposed mechanism comprises a chain of consequences induced by moisture, wherein chemical degradation of the interlamina hot region is followed by mechanical interlamina separation and bulging caused by steam pressure. POLYM. COMPOS., 26:770–777, 2005. © 2005 Society of Plastics Engineers