Block ionomer complexes based on sulfonated polystyrene-block-poly(ethylene-ran-butylene)-block-polystyrene (SSEBS) and a tertiary amine-terminated poly(epsilon-caprolactone), denoted as SSEBS-c-PCL, were used to toughen epoxy resin. Well-dispersed spherical microdomains, consisting of a poly(ethylene-ran-butylene) core surrounded by a sulfonated polystyrene shell, were revealed by transmission electron microscopy (TEM) and small-angle X-ray scattering (SAXS) in the cured epoxy blends with 10 wt % SSEBS-c-PCL of various compositions. Structural parameters, core radius (R-c), effective hard-sphere radius (R-hs), and shell thickness (T-s) were obtained by fitting the SAXS data with a core-shell model and, for the first time, correlated with the fracture toughness (critical stress intensity factor K-IC and strain energy release rate G(IC)) of the epoxy blends. K-IC and G(IC) were found to increase with increasing R-c and R-hs but decrease with T-s. The blend containing SSEBS-c-PCL with least PCL, i.e., 2.4 wt %, shows nanostructure of the largest R-c and R-hs, and smallest T-s, displaying highest K-IC and G(IC). Examination of the fracture surfaces indicates that the increased toughness arises from interfacial debonding of spherical microdomains and plastic expansion of resultant nanovoids, followed by small-scale matrix shear deformation. The correlations between nanostructure parameters and fracture toughness have provided a fundamental understanding of nanostructure toughening of thermosets via an innovative strategy based on block ionomer complexes.