Urea-formaldehyde (UF) resins'water tolerance and swelling thickness of interior-grade wood panels bonded with UF resins were improved markedly by introducing small amounts of UFPropanal (UFP) polycondensates into the UF resin. "C NMR of urea-propanal (UP) resins showed that urea and propanal do react up to the formation of dimers. The water repellancy imparted by insertion in the resin of the alkyl chain of propanal limits the proportion of propanal that can be used. Gel permeation chromatography showed that this appears to be so because UP resins and UFP resins exist as an equilibrium between two separate intermingling phases, namely one in solution and the second in a state of physical gelation. This latter is different from the state of physical gelation observed on ageing or advancement of formaldehyde-only based poly-condensation resins. This physical gelation is brought on by the insertion in the resin of the water repellant chain of the propanal reacted with urea and constitutes a new state of physical gelation of polycondensates other than what was already reported in the literature. (c) 2006 Wiley Periodicals, Inc.