The performance of polymer matrix composite (PMC) materials relies on the history of chemical and physical environments to which they have been subjected. The understanding of a PMC's current state is crucial in order to optimize processing parameters and thereby maximize material performance. Nanoscale embedded sensors (such as colloidal nanoparticles, quantum dots, and molecular compounds) provide a non-destructive, in situ platform to monitor material properties through the utilization of the nanosensors' optical response and corresponding modulation thereof through interactions with the environment. This review summarizes the current state of embedded plasmonic and photoluminescent optical sensing pertaining to local chemical environment, temperature, viscosity and stress/strain as applicable to PMCs. We highlight important scientific advances that have enabled new sensing approaches and emphasize promising directions where advances are still required.