In the last decades, several studies have been performed on polymers reinforced with steel cords or wires. However, the diameter of these steel reinforcements was still quite large (200 mu m and more). Recently, stainless steel fibres were developed with a diameter down to 30 mu m, which makes it possible to process steel fibre-reinforced composites in a similar way as carbon- or glass fibre-reinforced composites. If a proper combination of the ductile steel fibre and a ductile polymer is chosen, a ductile composite should be achieved. This article reports on the influence of the matrix toughness and the fibre/matrix adhesion strength on the ductility of the resulting steel fibre-reinforced textile composite. Tensile tests have been combined with microscopic analysis to investigate the relation between the mechanical behaviour and the observed damage morphology. It was found that distributed damage increases the toughness in a textile composite, because it softens the transversal structure that interlocks the ductile load-bearing yarns. This explains the counterintuitive observations regarding the influence of the matrix ductility and the fibre/matrix adhesion strength on the composite toughness. It was found that selecting a brittle epoxy matrix can lead to a ductile composite, because of the widely spread and dense cracking pattern that allows more strain on the ductile steel fibres. If the fibre-matrix adhesion is enhanced by introducing a silane coupling agent to the fibre surface, transversal cracks are prevented and the ductility of the composite drops drastically. These results for the textile composites are contrary to earlier findings on the UD and cross-ply counterparts.