An extensive study has been performed assessing the structure and mechanical fracture and fatigue behaviour of rubber modified CIBA GEIGY GY260 cured with piperidine. The static fracture toughness was found to be unusually high, peaking at 2% rubber addition. The KI, value for the unmodified material was over three times higher than that of comparable epoxy systems, suggesting that a chemical modification may have taken place on the epoxy backbone. Structurally, the classical rubber particle morphology was not observed. Instead, a co-continuous structure was observed containing no discernible rubber concentrations. The structure of the low rubber content materials was significantly finer than that of the high rubber content materials, with the transition occurring at 2% rubber. A reaction mechanism has been proposed based on the hypothesis that the backbone modification has resulted in the formation of two types of reactive side groups that contribute to the overall toughness and solubility parameters of the material in different ways.