The initial stress-strain behavior in a short fiber-reinforced metal matrix composite (MMC) has been investigated by means of the finite element method coupled with the modified law of mixture. The stress-strain partition parameter q and its first and second order derivations q' and q" were calculated to reveal the initial deformation features, which were then related to the inhomogeneity of the matrix plasticity. It was demonstrated that the initial stress-strain curve deviates from a strict linear relation due to the matrix local plastic flow, dependent on the distribution and extent of the matrix plastic regions. A distinct initial yield point exists and can be determined sensitively from the q' curve, at which the matrix plastic flow takes place in most of the fiber end region. A nominal modulus value, defined as the average slope of the stress-strain curve before the initial yield point, can be used to describe the elastic response of the composite. Thermal residual stresses (TRS) and the loading mode (tension or compression) have very important effects on the initial deviation, the initial yield point and subsequent strain hardening rate by altering the matrix plasticity.