Hygrothermally decomposed polyurethane (HD-PUR) of a polyester type was used as an impact modifier in tri- and tetrafunctional epoxy (EP) resins. Between 5 and 80 wt % of the PUR modifier was added to the EP prior to its crosslinking with a diamine compound (diaminodiphenyl sulfone, DDS). The mean molecular weight between crosslinks (M-c) was determined from the rubbery plateau modulus of the dynamic mechanical thermal analysis (DMTA) spectra. The fracture toughness (K-c) and energy (G(c)) of the modified resins were determined on static-loaded compact tension (CT) specimens at ambient temperature. The change in the K-c and G(c) as a function of M-c followed the prediction of the rubber elasticity theory. The efficiency of the HD-PUR modifier was compared with that of a carboxyl-terminated liquid nitrile rubber (CTBN). Attempts were also made to improve the functionality of the modifier by hygrothermal decomposition of PUR in the presence of glycine and E-caprolactam, respectively. DMTA and fractographic results showed that HD-PUR functions as an active diluent and a phase-separating additive at the same time. As HD-PUR can be regarded as an amine-functionalized rubber, it was used as the hardener (by replacing DDS) in some EP formulations.