N-Phenylmaleimide-styrene-p-hydroxystyrene terpolymers (PMSH) and N-phenylmaleimide-styrene-p-allyloxystyrene terpolymers (PMSA), containing pendant functionalities, were prepared and used to improve the toughness of the bismaleimide resin composed of bis(4-maleimidediphenyl)methane and o,o’-diallyl bisphenol A. PMSH (0.5 mol % p-hydroxystyrene [HSt] unit) was more effective as a modifier than PMSA (0.5 mol % p-allyloxystyrene unit). When using 5 wt % of PMSH with 0.5 mol % HSt unit, the fracture toughness (K-IC) for the modified resin increased 60% with only a modest loss of flexural strength and with retention in flexural modulus and the glass transition temperature. Morphologies of the modified resins changed from particulate to cocontinuous and to inverted phase structures, depending on the modifier structure and content. The most effective improvement of properties for the modified resins could be attained because of the cocontinuous structure. The toughening mechanism was discussed in terms of the morphological characteristics of the modified bismaleimide resin systems.