The cure process and the mechanical properties of blends of diglycidyl ether of bisphenol-A-based epoxy resin and hydroxyl terminated, internally epoxidized polybutadiene rubber have been studied. Internal oxirane groups are characterized by a main absorption at 885 cm-1 in the infrared spectrum while the terminal oxirane groups of the diepoxide monomer absorb at 913 cm-1. In the absence of prereaction of the rubber, gelation of the epoxy matrix occurs much faster than any reaction involving the internal oxirane groups or the terminal hydroxyl groups. Therefore, only weak chemical bonding between the rubber particles and the epoxy matrix exists and the fracture toughness of the blends does not show any significant improvement. Upon prereaction of the rubber with an excess diepoxide monomers, a 40% improvement in the value of the critical stress intensity factor is obtained. However, dynamic mechanical spectra of these blends acquired in the rubbery plateau region uniquely demonstrate that this improvement is due to the incorporation of the rubber into the epoxy network rather than to the presence of phase-separated rubber particles.