Polyacrylonitrile (PAN) and PAN/carbon nanotube (CNT) composite (99/1) based carbon fibers with an effective diameter of about 1 μm have been processed using island-in-a-sea bi-component cross-sectional geometry and gel spinning. PAN/CNT (99/1) based carbon fibers processed using this approach exhibited a tensile strength of 4.5 GPa (2.5 N/tex) and tensile modulus of 463 GPa (257 N/tex), while these values for the control PAN-based carbon fiber processed under the similar conditions were 3.2 GPa (1.8 N/tex) and 337 GPa (187 N/tex), respectively. Properties of these 1 μm diameter carbon fibers have been compared to the properties of the larger diameter (>6 μm) PAN and PAN/CNT based carbon fibers.