The influence of toughener and clay concentration oil the morphology and mechanical properties of three-phase, rubber-modified, epoxy nanocomposites was studied. Nanocomposite samples were prepared by adding octadecyl ammonium ion exchanged clay to a dispersion of preformed acrylic rubber particles in liquid epoxy, so as to minimize alteration to the rubber morphology in the final cured specimen. The state of clay platelet exfoliation and rubber dispersion ill the cured nanocomposition was studied using transmission electron microscopy. The amounts of clay platelet separation and dispersion of clay aggregates in the epoxy matrix were found to be sensitive to clay and toughener concentration, and clay platelets preferentially adsorb to the rubber particles. Tensile modulus and strength increase and ductility decreases with increasing organoclay content, while rubber has the opposite effects oil the properties of epoxy resin. When both additives are present in epoxy resin, a favorable combination is produced: ductility is enhanced without compromising modulus and strength. Modulus and strength are improved by nano and micro dispersion of nanoclay in the epoxy matrix, whereas elongation and toughness are improved by clay adsorption to the rubber particle Surface, which promotes cavitation. The glass transition temperature Of epoxy resin remains relatively unchanged with clay addition. (c) 2005 Elsevier Ltd. All rights reserved.