The failure mechanisms encountered during the machining of carbon nanotube (CNT) polymer composites are primarily governed by the strength of the CNT–polymer interface. Therefore, the interface should be explicitly modeled in microstructure-level machining simulations for these composites. One way of effectively capturing the behavior of this interface is by the use of a cohesive zone model (CZM) that is characterized by two parameters, viz., interfacial strength and interfacial fracture energy. The objective of this study is to estimate these two CZM parameters of the interface using an inverse iterative finite element (FE) approach. A microstructure-level 3D FE model for nanoindentation simulation has been developed where the composite microstructure is modeled using three distinct phases, viz., the CNT, the polymer, and the interface. The unknown CZM parameters of the interface are then determined by minimizing the root mean square (RMS) error between the simulated and the experimental nanoindentation load–displacement curves for a 2 wt. % CNT–polyvinyl alcohol (PVA) composite sample at room temperature and quasi-static strain state of up to 0.04 s−1, and then validated using the 1 wt. % and 4 wt. % CNT–PVA composites. The results indicate that for well-dispersed and aligned CNT–PVA composites, the CZM parameters of the interface are independent of the CNT loading in the weight fraction range of 1–4%.