The diglycidyl ether of bisphenol-A (DGEBA) resin was modified with amine functional aniline acetaldehyde condensate (AFAAC) and cured with an ambient temperature curing agent triethylene tetramine. The resulting networks displayed significantly improved fracture toughness. The AFAAC was synthesized by the condensation reaction of aniline and acetaldehyde in the acid medium (pH 4) and characterized by FTIR and NMR spectroscopy, elemental analysis, viscosity measurements, and mole of primary and secondary amine analysis. The DGEBA and AFAAC were molecularly miscible but developed a two-phase microstructure upon network formation. Epoxy/AFAAC compositions were systematically varied to study the effect of AFAAC concentration on the impact, adhesive, tensile, and flexural properties of modified networks. The dynamic mechanical analysis and scanning electron microscopy studies showed two phase morphology in the cured networks, where AFAAC particles were dispersed. The AFAAC modified epoxy network was thermally stable up to around 280 degrees C.