Propagation of cracks within a corrugated interface of a layered composite was investigated by calculating energetic conditions for a crack loaded in a mixed mode of opening and shear to be deflected around the saw-tooth corner of the interface profile. It was predicted that in case of a defect-free interface, in which a crack is deflected in consequence of competition between penetration into the bulk layer and deflection around the saw-tooth shaped corner, deflection is possible only when the interface is impractically weak. However, when the corner defect is embedded within the interlayer, coalescence of the primary crack into the defect to form an L-shaped crack is energetically favoured, while the interface fracture energy as high as that of the planar crack-deflecting interfaces in an equivalent composite laminate is allowed. Therefore, it is proposed that by incorporating defects in a controlled manner, it is possible to produce layered composites with corrugated interfaces for improved shear resistance without sacrificing the interface strength properties.