This study explores the concept of composite construction simultaneously at nano- and macroscopic length scales. This approach promises to allow improvement of multiple properties coincidentally but independently. A model system was identified that allows us to test this concept by combining molecular level hybridization using a silsesquioxane epoxy nanocomposite with macroscopic modification using core-shell rubber particles (CSR). The objective here was to form an epoxy resin system with enhanced thermal stability, elastic modulus, and fracture toughness. The nanocomposite was made by reacting octa(dimethylsiloxyethylcyclohexyl epoxide)silsesquioxane (OC, 1.3 nm diameter) with diaminodiphenylmethane (DDM). This resin offers excellent elastic moduli and thermal stabilities at the expense of poor fracture toughness. OC/DDM is a "single phase" hybrid nanocomposite that is used here as a matrix for approximate to 100 nm diameter CSR reinforcing particles. Characterization of OC/DDM/CSR composites shows that fracture toughness improves significantly on inclusion of CSR particles with little effect on elastic moduli and thermal stability. Stress and strain at failure also improve, indicating better fracture toughness. SEM studies suggest that shear yielding and CSR pull-out are the likely sources of toughening.