Composite nanofibers with 5% w/w multiwalled carbon nanotubes (MWCNTs) in polyacrylonitrile (PAN) were fabricated using the electrospinning technique. Morphological development during the carbonization process was characterized by transmission electron microscopy (TEM) with in situ heating. It was found that the orientation of graphitic layers increases with temperature and does not change significantly with time during our TEM measurement, except the 750 degrees C. In the heating stage at 750 degrees C noticeable enhancement of orientation with time was observed. The presence of embedded CNTs enhances the order of the formed graphitic structures even when the CNTs are irregular or entangled. The results indicate that embedded MWCNTs in the PAN nanofibers nucleate the growth of carbon crystals during PAN carbonization. (C) 2010 Wiley Periodicals, Inc. J Polym Sci Part B: Polym Phys 48: 2121-2128, 2010