Bisphenol A-based epoxy resins were modified with either phenolic hydroxyl or aromatic amine functionally-terminated poly(arylene ether sulphone) oligomers and thermally cured with 4,4′ diaminodiphenyl sulphone. The resulting networks displayed significantly improved fracture toughness, with little sacrifice in modulus. The bisphenol A-based polysulphones were molecularly miscible with the epoxy precursors over the entire range of compositions and molecular weights investigated, but developed a two phase structure upon network formation. The molecular weights and composition of polysulphone chemically incorporated into the network were varied and their effect on several important physical properties was investigated. The dynamic mechanical analysis and scanning electron microscopy (SEM) studies showed that it is possible to generate a two-phase morphology in the cured networks wherein polysulphone composite particles are dispersed in the epoxy matrix. Despite the two-phase structure, the modified crosslinked systems are nearly transparent, due to a similarity in component refractive index values. The fracture toughness of these modified networks under plane strain conditions improved significantly with minimal sacrifice of the flexural modulus. © 1991.