The objective of this research is to investigate the feasibility of using surface treated recycled rubber particles for toughening of epoxy polymers. These particles are obtained through grinding of scrap tires followed by oxidizing the surface of the particles in a reactive gas atmosphere. Surface treated recycled rubber particles with a nominal particle size of approximately 75 mu m and a commonly used reactive liquid elastomer, CTBN, have been incorporated in a DGEBA epoxy resin. It has been shown that the recycled rubber particles are not as effective as CTBN in toughening of the epoxy matrix. However, blending of the two modifiers results in a synergistic toughening. Microscopy reveals that, when used alone, recycled rubber particles simply act as large stress concentrators and modestly contribute to toughening via crack deflection and microcracking. In the presence of micron size CTBN particles, which cavitate and induce massive shear yielding in the matrix, however, the recycled particles "stretch" the plastic deformation to distances far from the crack tip. This mechanism causes plastic zone branching and provides an unexpectedly high fracture toughness value. This study, therefore, provides a practical approach for manufacturing engineering polymer blends utilizing the surface modified recycled rubber particles.