A micromechanical framework is proposed to investigate the effective mechanical properties of elastic two-phase composites with randomly dispersed inhomogeneities in the form of continuous fibres. In this study, an algorithm is developed to generate the microstructure of unidirectional fibre reinforced composite through a three dimensional RVE approach. Using this approach, both regular and random fibre distributions with both undistorted and distorted cross sections are considered and then analysed using mathematical theory of homogenization to estimate the homogenized or effective material properties. Here, RVEs are modeled with random fibre distribution maintaining a fibre volume fraction of 0.6 but increasing the number of fibres gradually and also randomly varying their positions. Finally, the effect of the variation of local volume fraction is studied through master RVE using the moving window technique. The variation in the predicted elastic properties for the given volume fraction for the above-mentioned scenarios is compared with the experimental values. The study shows that results from RVE with more number of random fibres arrangement with geometric cross sectional variations approach the experimental values. However, there is a significant percentage difference in transverse shear moduli, G23 and ν23, of about 22% and 35%, respectively with respect to the experimental results for the scenarios with random fibre distribution. Further, about 16% difference in axial modulus E1 is seen when the effects of local volume fractions are studied. © 2019 Elsevier Ltd