The microstructure and fracture performance of an anhydride-cured epoxy polymer modified with two poly(styrene)-b-1,4-poly(butadiene)-b-poly(methyl methacrylate) (SBM) block copolymers were investigated in bulk form, and when used as the matrix material in carbon fibre reinforced composites. The 'E21' SBM block copolymer has a higher butadiene content and molecular weight than the 'E41'. A network of aggregated spherical micelles was observed for the E21 SBM modified epoxy, which became increasingly interconnected as the SBM content was increased. A steady increase in the fracture energy was measured with increasing E21 content, from 96 to 511 J/m(2) for 15 wt% of E21. Well-dispersed 'raspberry'-like SBM particles, with a sphere-on-sphere morphology of a poly(styrene) core covered with poly(butadiene) particles, in an epoxy matrix were obtained for loadings up to 7.5 wt% of E41 SBM. This changed to a partially phase-inverted structure at higher E41 contents, accompanied by a significant jump in the measured fracture energy to 1032 J/m(2) at 15 wt% of E41. The glass transition temperatures remained unchanged with the addition of SBM, indicating a complete phase separation. Electron microscopy and cross polarised transmission optical microscopy revealed localised shear band yielding, debonding and void growth as the main toughening mechanisms. Significant improvements in fracture energy were not observed in the fibre composites, indicating poor toughness transfer from the bulk to the composite. The fibre bridging observed for the unmodified epoxy matrix was reduced due to better fibre-matrix adhesion. The size of the crack tip deformation zone in the composites was restricted by the fibres, hence reducing the measured fracture energy compared to the bulk for the toughest matrix materials.