Abstract: To obtain high performance PAN-based carbon fibers, the microstructural changes of the fibers were systematically tracked by SEM and TEM in the process of wet-spinning, preoxidation, precarbonization, and carbonization. High-quality PAN fibers with a near circular cross-section, compact microfibrils and few defects or fissures on the surface are obtained by wet spinning at a coagulation temperature of 16℃ and a pre-stretching ratio of 7. The microfibrils on the surface of the PAN fibers are retained after oxidative stabilization. The graphite crystallites in the outer layer of the carbon fibers are large with few pores, while the inner crystallites are small with many pores. High quality oxidative stabilized PAN fibers can be obtained by treating the precursors with potassium permanganate solution, which suggests that it can increase the number of basal planes as well as the degree alignment along the fiber axis. The carbon fibers inherit the microstructure of the PAN fibers, and the degree of alignment of the microfibrous graphite crystallites along the fiber axis is high, leading to the formation of fine and long pores and regularly extended networks viewed from the cross-section. At appropriate carbonization conditions, carbon fibers having tensile strength of 3.6-4.2GPa, elongation at break of 1.6-1.8% and moduli of 235-240GPa are obtained. High performance carbon fibers can be obtained from PAN fibers with high tenacity, high degree of preferred alignment, and few defects inside and on surface of the fibers.