How to significantly improve the mechanical and tribological properties of polyamide 46/polyphenylene oxide (PA46/PPO) alloy is an urgent but challenging issue. The PA46/PPO alloy reinforced with polyurethane-coated carbon fiber (PCF) was prepared and characterized. It was found that the mechanical properties, heat resistance, and tribological properties of PA46/PPO were greatly enhanced by incorporating PCF. When the composite containing 40 wt% of PCF, the tensile strength of the composite increased from 82 MPa to 282 MPa; meanwhile, volumetric wear was 0.56 mm3, which decreased by 95% in comparison with PA46/PPO. Scanning electron microscopy results showed that PCF had a good compatibility with the polymer matrix, due to good interfacial interaction between the PCF and the PA46/PPO. X-Ray photoelectron spectroscopy and laser Raman spectroscopy results further revealed that more graphitic carbon was microcracked to form a lubricating layer during friction process, thus remarkably improving the wear resistance of PA46/PPO.