Abstract The evolution of residual stress with plastic pre-strain was studied on a squeeze-cast, 2D-random short-fibre-reinforced metal matrix composite (aluminium/Saffil®). The plastic pre-strain was applied in three different modes: (1) uniaxial compression parallel to the fibre plane, (2) uniaxial tension parallel to the fibre plane, and (3) uniaxial compression normal to the fibre plane. The mean deviatoric residual stresses in the aluminium matrix were analysed using neutron diffraction. A major outcome is that the residual matrix stress is controlled by the load transfer to the fibres during deformation of the composite and reverse matrix plastic flow during unloading. The interplay between matrix and fibres depends strongly on the loading mode, and so does the evolution of the residual stresses as a function of pre-strain. This could be rationalised in a unified way using an Eshelby model.