Dispersed silicone rubbers were used to reduce the stress of cresol-formaldehyde novolac epoxy resin cured with phenolic novolac resin for electronic encapsulation application. The effects of structure, molecular weight, and contents of the vinylsiloxane oligomer on reducing the stress of the encapsulant were investigated. Morphology and dynamic mechanical behavior of rubber-modified epoxy resins were also studied. The dispersed silicone rubbers effectively reduce the stress of cured epoxy resins by reducing flexural modulus and the coefficient of thermal expansion (CTE), whereas the glass transition temperature (T(g)) was hardly depressed. Electronic devices encapsulated with the dispersed silicone rubber-modified epoxy molding compounds have exhibited excellent resistance to the thermal shock cycling test and have resulted in an extended device use life.