The smart sandwich structures have been widely used in the aerospace, automobile, marine, and civil engineering applications. A typical smart sandwich structure is usually comprised of two stiff face skins separated by a thick core with variety of embedded sensors to monitor the performance of the structures. In this study, the smart composite sandwich structure (CSS) samples are fabricated with glass microballoons syntactic foam core and resin infused glass-fiber face skins (with piezoelectric fiber composite sensors (PFCS) embedded inside the resin infused glass-fiber face skins). One of the main concerns associated with embedding sensors inside composite structures is the structural continuity, compatibility, and interface stress concentrations caused by the significant differences in material property between sensor and host structures. PFCS are highly flexible, easily embeddable, highly compatible with composite structures and their manufacturing processes, which makes them ideal for composite health monitoring applications. In this study, in-plane tensile, tension–tension fatigue, short beam shear, and flexural tests are performed to evaluate the effect on strengths/behavior of the CSS samples due to embedded PFCS. Then carefully planned experiments are conducted to investigate the ability of the embedded PFCS to monitor the stress/strain levels and detect damages in CSS using modal analysis technique. The tensile tests show that both the average ultimate strength and the modulus of elasticity of the tested laminate with or without embedded PFCS are within 7% of each other. The stress–life (S-N) curves obtained from fatigue tests indicates that the fatigue lives and strengths with and without the PFCS are close to each other as well. From short beam and flexural test results, it is observed that embedded PFCS leads to a reduction of 5.4% in the short beam strength and 3.6% in flexural strength. Embedded PFCS’s voltage output response under tension–tension fatigue loading conditions has been recorded simultaneously to study their ability to detect the changes in input loading conditions. A linear relationship has been observed between the changes in the output voltage response of the sensor and changes in the input stress amplitude. This means that by constantly monitoring the output response of the embedded PFCS, one could effectively monitor the magnitude of stress/strain acting on the structure. Experiments are also performed to explore the ability of the embedded PFCS to detect the damages in the structures using modal analysis technique. Results from these experiments show that the PFCS are effective in detecting the initiations of damages like delamination inside these composite sandwich structures through changes in natural frequency modes. Hence embedded PFCS could be an effective method to monitor the health of the composite sandwich structures’ in-service conditions.