This study experimentally and numerically investigates mechanism of shear-cutting for CFRP cross-ply laminates. Cross-ply laminates were cut in a wide range of clearance, which was the distance between the upper tool and the lower tool. Shearing zone was observed during cutting; the cut specimens were also observed by the soft X-ray radiography to evaluate delamination extension. Multiple transverse cracks and delamination first appeared in the shearing zone, and the top and the bottom 0° plies then broke at the contact edges by further indentation of the upper cutting tool. Shear-cutting process was then predicted by smoothed particle hydrodynamics (SPH). A unidirectional lamina was considered as a homogeneous orthotropic material, and nonlinear shear behavior of a unidirectional lamina was considered in order to take plastic deformation into account. Generation of fiber failure, matrix failure and delamination was predicted by stress-based criteria, and the stiffness and the stress corresponding to each failure mode were degraded. The predicted damage states as well as the failure-patterns agreed well with the observations. We compared the cutting process between the experiments and analysis, and discussed mechanisms of shear cutting, i.e., generation and evolution of damage, and influence of cutting parameters on damage states. The numerical simulation revealed that the damage pattern was governed not only by the shear stress but by the local bending stress. A large clearance enlarged the size of damage due to the considerable local bending, but provided little difference of the damage extension process, because the great shear stress generated between the two tool edges was the key factor of most of the damage.