Thermoplastic epoxy blends are successfully used commercially. The thermoplastic may serve as a toughening agent although other properties may also be improved. In the present study, microscopy and mechanical testing techniques were used to study morphology and ultimate properties of ternary epoxy/Poly(methyl methacrylate) (PMMA)-Poly(ethylene oxide) (PEO) blends. PEO is functioning like a compatibilizer by which the morphology of the resulting polymer mixture may be changed dramatically by only small amounts of PEO. Whilst stiffness was controled by the corresponding matrix of the ternary mixture, both strength and fracture toughness were a function of the defined morphology. However, the most efficient toughening agent was PMMA, in particular when present as a co-continuous PMMA-rich phase within the epoxy-rich matrix.