The in-situ cure and cure kinetics of an epoxy resin based on diglycidyl ether of bisphenol A (DGEBA) polymerized with an anhydride hardener and its mixtures with a liquid polybutadiene rubber having hydroxyl functionality (HTPB) were studied using Fourier transform infrared spectroscopy (FTIR) and differential scanning calorimetry (DSC) in an isothermal mode. The cure reaction was monitored in-situ by FTIR spectroscopy by observing variation in intensity of epoxy, anhydride, and ester bands. The cure reaction mechanisms by which the network structure of epoxy was developed were discussed. Isothermal mode DSC measurements were performed at selected temperatures. The reaction followed an autocatalytic mechanism, and kinetic analysis was done by a phenomenological model developed by Kamal. Good fits were obtained between the autocatalytic model and the experimental data up to the vitrification state. Afterward, the reaction became diffusion controlled. The reaction during the later stages of cure was explained by introducing a diffusion factor, which agreed well with the kinetic data. The nature of the developing morphology of modified epoxies was analyzed by optical microscopy (OM) and small angle laser light scattering (SALLS) technique. The ultimate morphology, of the cured blends was analyzed using scanning electron microscopy (SEM). The cure kinetics has been correlated with the developed morphology to get insight into the mechanism of reaction-induced microphase separation.