A new micromechanical model is provided to account for the full interaction between rubber particles in toughened polymers. Three-dimensional large deformation elastic-plastic finite element analysis is carried out to obtain the local stress and strain fields and then a homogenization method is adopted to obtain the effective stress-strain relation. The dependence of the local stress and strain distributions and effective stress-strain relation on phase morphology and mechanical properties of rubber particles is examined under various transverse constraints. The profile for the effective yield surface is obtained at four different particle volume fractions. It is shown that stress triaxiality affects significantly the effective yield stress and the local stress concentrations. Rubber cavitation and matrix shear yielding are two coupled toughening mechanisms; which one occurs first depends on the properties of rubber particles and matrix and the imposed triaxiality. Rubber cavitation plays an important role in the toughening process under high tensile triaxial stresses. Axisymmetric modelling may underestimate, and two-dimensional plane-strain modelling may overestimate, the inter-particle interaction compared with three-dimensional modelling.