Various advantages offered by Automated Fiber Placement (AFP) have led to its increasing application in the aerospace industry to manufacture high-quality, large structural parts. Application of this technology, however, is considerably restrained by the defects that appear in the layup particularly during tow steering. An extensive experimental investigation using various process parameters and steering radii is performed to gain a deeper understanding of defect formation processes during steering of thermosetting prepreg tows. Five predominant defect types, namely in-plane fiber waviness, sheared fibers, tow pull up (bridging), blisters and out-of-plane wrinkles that occur during the steering are identified. The defects formation mechanisms are explained and discussed. Furthermore, a more detailed set of experiments is performed to capture the viscoelastic growth of individual wrinkles with time. A novel finite element modeling framework for simulating the prepreg deposition process is presented in the commercial finite element software, Abaqus. It is demonstrated that by prescribing the global behavior of prepreg tow during the process and representing prepreg tack with an appropriate cohesive zone model, this approach is capable of capturing wrinkles and blisters that are caused by tow steering. Moreover, the conventional local approaches for modeling defects are extended by utilizing a viscoelastic interface to develop a theoretical model which is capable of demonstrating the time-dependent growth of wrinkles. The interaction between prepreg and compaction roller is known to be influential on the quality of the deposited tow. Five compaction rollers with different materials, stiffness, and architecture are built. In a series of experiments the effect of each roller on the appearance of defects, particularly on blisters is investigated. The optimum roller design based on the experimental observations was identified.