Epoxy resin based on diglycidyl ether of bisphenol A and varying content of hydroxyl terminated polybutadiene were cured using an anhydride hardener. The ultimate aim of the study was to modify the brittle epoxy matrix by liquid rubber to improve the toughness characteristics. Chemorheological analysis of the modified network was performed to understand the physical transformations taking place during the cure polymerization reaction. The delay in gel time on inclusion of rubber can be explained by lower reactivity due to dilution and viscosity effect. Tensile. flexural. and fracture toughness behaviors of neat as well as modified networks have been studied to observe the effect of rubber modification. The morphological evolution of the toughened networks was examined by scanning electron microscope, and the observations were used effectively to explain the impact properties of the network having varying content of liquid rubber. Acoustic emission studies were performed on neat and certain modified systems. Based on acoustic emission results and morphological characteristics, toughening and failure mechanisms were discussed. The behavior of the relaxation peaks were evaluated by dynamic mechanical analysis and tried to explain the composition of networks. Thermal stabilities of the toughened epoxies were studied using thermogravimetric analysis (TGA). The activation energy for decomposition of neat and modified epoxies has been estimated and compared. The reduction in cross-linking density of the thermoset upon modification has been confirmed and explained. (C) 2007 Elsevier Ltd. All rights reserved.