Two series of toughened, semiconductive polyaniline (PANI)/polyurethane (PU)-epoxy (PANI/PU-EPOXY) nanocomposites were prepared using a conductive polymer, PANI, and PU prepolymer-modified-diglycidyl ether of bisphenol A (DGEBA) epoxy. First, the PU prepolymer-modified epoxy oligomer was synthesized by a stoichiometric reaction between the terminal isocyanate groups of the PU prepolymer and the pendent hydroxyl groups of the epoxide. PU prepolymers were made either of polyester (polybutylene adipate, PBA) or polyether (polypropylene glycol, PPG) segments. The composites were characterized by thermal, morphological, mechanical, and electrical studies. Impact strength was enhanced 100% in PU (PPG 2000)-modified composites; whereas, only ca. 30-50% increases in impact strength were observed for the other modified composites. In addition, the thermal stability of this composite proved superior to that of neat epoxy resin, regardless of a PU content at 27.5 wt%. Scanning electron microscopy (SEM) morphology study showed that the spherical PU (PPG 2000) particles (ca. 0.2-0.5 pm) dispersed within the matrix accounts for these extraordinary properties. The conductivity of the composite increased to ca. 10(-9) -10(-3) S cm(-1) upon addition of PANI when tested in the frequency range 1 kHz-13 MHz. This study demonstrated a useful way to simultaneously improve the toughness and conductivity of the epoxy composite, thus rendering it suitable for electromagnetic interference and various charge dissipation applications. POLYM. ENG. SCI., 48:345-354, 2008. (c) 2007 Society of Plastics Engineers.