Polybenzoxazine as a noble phenolic resin was modified with amine-terminated butadiene acrylronitrile rubber (ATBN) and with carboxyl-terminated butadiene acrylronitrile rubber (CTBN) in order to improve its mechanical properties. The fracture toughness, flexural modulus, and flexural strength of rubber-modified polybenzoxazine were measured to investigate the effect of rubber modification. In fracture toughness, ATBN is more effective than CTBN. ATBN-modified polybenzoxazine showed better distribution of rubber particles in matrix phase than did CTBN-modified polybenzoxazine. The cure rates in these systems were monitored by differential scanning calorimetry to investigate the effect of cure rate on rubber size. The change of glass transition temperatures of rubber-modified polybenzoxazine was measured with a dynamic mechanical thermal analyzer to explain the variation of mechanical properties. In addition, the relationship between mechanical properties and the morphology of rubber-modified polybenzoxazines was also undertaken.