Composites are prone to failure during operating conditions and that is why vast research studies have been carried out to develop in situ sensors and monitoring systems to avoid their catastrophic failure and repairing cost. The aim of this research article was to develop a flexible strain sensor wire for real-time monitoring and damage detection in the composites when subjected to operational loads. This flexible strain sensor wire was developed by depositing conductive silver (Ag) nanoparticles on the surface of nylon (Ny) yarn by electroless plating process to achieve smallest uniform coating film without jeopardizing the integrity of each material. The sensitivity of this Nylon/Ag strain sensor wire was calculated experimentally, and gauge factor was found to be in the range of 21–25. Then, the Nylon/Ag strain sensor wire was inserted into each composite specimen at different positions intentionally during fabrication depending upon the type of damage to detect. The specimens were subjected to tensile loading at a strain rate of 2 mm/min. Overall mechanical response of composite specimens and electrical response signal of the Nylon/Ag strain sensor wire showed good reproducibility in results; however, the Nylon/Ag sensor showed a specific change in resistance in each direction because of the respective position. The strain sensor wire designed not only monitored the change in the mechanical behavior of the specimen during the elongation and detected the strain deformation but also identified the type of damage, whether it was compressive or tensile. This sensor wire showed good potential as a flexible reinforcement in composite materials for in situ structural health monitoring applications and detection of damage initiation before it can become fatal.