In this study, the continuum damage mechanics model for predicting the stiffness reduction of composite laminates including transverse cracks is formulated as a function of crack density. To formulate the model, first the damage variable in the direction normal to the fiber of a ply including transverse cracks is derived. The damage variable is derived by the model assuming a plane strain field in the isotropic plane and using the Gudmundson–Zang model for comparison. The effective compliance based on the strain equivalent principle proposed by Murakami et al. and classical laminate theory are then used to formulate the elastic moduli of laminates of arbitrary lay-up configurations as a function of the damage variable. Finally, the results obtained from this model are compared to the finite-element analysis reported in previous studies. The model proposed in this paper can predict the stiffness of laminates containing damage due to transverse cracks (or surface crack) from just the mechanical properties of a ply and the lay-up configurations. Furthermore, this model can precisely predict the finite-element analysis results and experiment results for the elastic moduli of the laminate of arbitrary lay-up configuration, such as cross-ply, angle ply, and quasi-isotropic, including transverse cracks. This model only considers the damage of the transverse crack; it does not consider damage such as delamination. However, this model seems to be effective in the early stage of damage formation when transverse cracking mainly occurs. The model assuming plane strain field in the isotropic plane which is proposed in this paper can calculate the local stress distribution in a ply including transverse cracks as a function of crack density. The damage evolution of transverse cracks can thus be simulated by determining the fracture criterion.