Diglycidyl ether of 3,3,5,5'-tetramethyl-4,4'biphenyl (TMBPDGE) which has been found great apphcations in semiconductor packaging was synthesized. The liquid crystalline phases of diglycidyl ether of 4,4'-dihydroxybiphenol (BPDGE) cured with phenol novolac (PN) were studied by wide angle X-ray diffraction (WAXD) and polarized optical microscopy (POM). BPDGE was in situ copolymerized with TMBPDGE to improve its thermal and mechanical properties by means of the LC domains retained in the crosslinked networks. The results indicated that a nematic phase was formed and fixed with proper curing schedule when BPDGE was cured with PN that had no neighboring active hydrogens and the LC domains could also be efficiently embedded into the composite systems. Dynamic mechanical properties showed that epoxy networks containing LC domains displayed higher alpha-relaxation temperature and linear elastic modulus traces. The impact toughness and T-g were improved with the addition of BPDGE. Scanning electron microscope observation of the fracture surfaces showed that there was a change in failure mechanism in the composite systems. (c) 2007 Wiley Periodicals, Inc.