Previous published work has shown that hydroxyl terminated perfluoroether oligomers can be suitably modified and functionalised to make them miscible with epoxy resins in the uncured state. The reaction conditions can adjusted to induce phase separation either through spinodal decomposition to produce an IPN type morphology, or by nucleation and growth if a dispersed-particle microstructure is required. In the present work we examine the relative toughening enhancement efficiency of the two possible heterophase morphologies. Both systems show a sigmoidal increase in fracture toughness, with increasing concentration of the perfluoroether modifier. However, this takes place at much lower modifier concentrations for the systems with a particulate morphology (about 3.5% w/w) than for IPN systems (about 7.5% w/w). The maximum fracture toughness achievable for the two systems, on the other hand, is very similar and coincides with the concentration at which co-continuous phases are formed. These differences in morphology, however, are not reflected in the variation of modulus and compressive yield strength with increasing concentration of perfluoroether modifier, in so far as both systems exhibit a gradual and small reduction in property with increasing concentration. Furthermore, the dynamic mechanical spectra of the two systems are very different, but the changes resulting from increasing the concentration of toughening agent are relatively small in either case. Nanoindentation tests indicate that it is the local plasticity, brought about by the presence of the softer perfluoroether phase, which is responsible for the enhancement of fracture toughness. This is corroborated by AFM examinations, which reveal local plastic deformations in the regions surrounding the softer particles. (C) 2003 Elsevier Science Ltd. All rights reserved.