This paper represents the first effort aimed to study the interdependence of mercerization, moisture absorption and mechanical properties of sustainable Phoenix sp. fibre-reinforced epoxy composites fabricated by compression moulding technique. The investigation was carried out by varying the fibre length (10, 20 and 30 mm), fibre volume fraction (10%, 20%, 30%, 40% and 50%), concentration of sodium hydroxide for fibre treatment (5%, 10% and 15%) and immersion temperature (10℃, 30℃ and 60℃). The fibre–matrix interface and failure mechanism was studied by using scanning electron microscopy. The results revealed that the moisture absorption rate increased with the increase in fibre length, fibre volume fraction and immersion temperature result in loss of tensile and flexural properties. The moisture absorbed samples shows 15% and 7% drop in tensile and flexural strength, respectively. However, this loss was less in mercerized fibre-reinforced composites.