Highly cross-linked polyurethanes have a high elastic modulus and creep resistance, but they undergo a brittle fracture below the glass transition temperature. The lack of substantial toughness in these polymers limits their use in practical engineering applications. One method that has shown promise in recent years is the creation of local regions of reduced modulus that absorb strain energy and act to toughen the polymer. For instance, rubbers are typically added to epoxy which phase separate upon polymerization and create local elastic regions that significantly toughen the polymer. Here a variety of two-phase polyurethanes in the form of single inclusions is designed to study the toughening mechanism of the local regions of reduced modulus with an embedded crack. Synthesized heterogeneous polyurethanes show a transition from brittle to ductile behavior in addition to a drastic increase in the maximum load that the polymer can withstand. Fracture mechanics experiments demonstrate that a small reduction in the inclusion's Young's modulus (similar to 10%) leads to an increase in the toughness by factor of 7 (similar to 700%). The finite element method and digital image correlation are utilized to study this toughening mechanism. Optical strain measurements confirm the numerical simulation results and possible toughening and strengthening mechanisms. (C) 2014 Elsevier Ltd. All rights reserved.