This paper studies the progression of damage in carbon fibre-reinforced polymer (CFRP) countersunk composite bolted joints (CBJs) with neat-fit clearance, subjected to quasi-static loading. Damage mechanisms, comprising of fibre buckling and breakage, matrix damage, shear damage and inter-laminar delamination within the CFRP composite parts of the joints have been studied. Load-displacement curves, X-ray and optical microscopic images in single- and three-bolt CBJs were used to investigate damage and deformation characteristics. The observations were then employed to further investigate the type of failure and the extent of damage. The evolution of damage within the composite parts was correlated to the failure characteristics of the joints: It was found that the type and extension of damage is strongly correlated with the ultimate failure load point of the joint in single-bolt CBJs. A combined inter/intra-laminar damage consisting of fibre cluster breakage, extensive fibre buckling, debonding and delamination was observed at the ultimate failure load. This study was then extended to three-bolt CBJ where damage surrounding each bolt and its corresponding failure load was strongly correlated: The final study showed that the ultimate failure point in single-bolt CBJ and the first-bolt-failure point in three-bolt CBJ correspond to the composite plies undergoing intra-laminar damage with the size reaching to the edge of the countersunk head. This damage developed extensively through the thickness of the composite parts underneath the countersink, and in the direction opposite to the loading direction. Outside the countersunk head, debonding and delamination were found to be the dominant damage driving mechanisms. Finally, a new design rule has been proposed to predict the response of multi-bolt joints (damage area and failure load) by using the response in single-bolt CBJ as an initial baseline.