It is necessary to understand the complete load response and failure mechanism of composite laminates to enhance the full potential of composite materials. Progressive failure algorithm for the post failure behavior of composite laminates was developed in the present study such that the damaged layer with many micro-cracks is replaced with an equivalent layer of degraded properties. Stresses and strains are calculated by the 3-D finite element method based on the generalized layerwise plate theory (GLPT) in order to consider the local effect near the free edges. The types and size of damage in composite laminates are predicted in the failure analysis that consist of a set of failure criteria and property degradation models for each mode of failure. In the case of matrix cracking, the macroscopic stiffness reduction model based on the shear-lag method is introduced to the finite element method in order to consider nonlinear progressive reduction of stiffness at each strain level. In order to predict the failure load and the damage accumulation accurately, the refined finite element model with 3-D stress field is used. The distribution of stress considering free edge effect is presented. The failure mechanism and ultimate failure loads of the cross-ply and quasi-isotropic laminates for different stacking sequences with the same thickness are investigated.