The thermal expansion behaviour of unmodified and siloxane-modifred epoxy resins has been investigated to clarify the mechanism by which siloxane modifiers lower the thermal expansion coefficient of epoxy moulding compounds containing inorganic fillers. A mechanism that accounts for all the observed characteristics is proposed. The thermal expansion coefficient of epoxy resins is increased by siloxane modifiers with carboxyl end groups, and the degree of the increase is dependent on the molecular weight of the modifiers. This increase is considered to be due to two effects : an increase in the local free volume in the epoxy matrix caused by the development of thermal stresses, and the building of siloxane molecules into the network structure. For sufficiently low molecular weight siloxane modifiers the latter effect is dominant, whereas with increasing molecular weight the former effect dominates. The increased coefficient of epoxy resins due to siloxane modifiers is likely to result in thermal stress near the filler-polymer interface because of an increased difference in the thermal expansion coefficient between the materials. This is one factor causing siloxane-modified epoxy moulding compounds to have a lower thermal expansion coefficient than unmodified ones.