The thermo-mechanical properties of diglycidyl ether of bisphenol-A (DGEBA) epoxy/silyl-diglycidyl ether terminated polydimethyl siloxane (PDMS) composites have been investigated; PDMS concentration was increased up to 15wt%. Differential scanning calorimetry (DSC) evidenced a phase separated microstructure as two glass transition temperatures, Tg, were detected: a high Tg at ca. 103°C corresponding to DGEBA phase, and a lower Tg at ca. 40°C. The lower Tg suggests interpenetration of PDMS into the DGEBA molecular network. SEM and AFM analyses confirmed the phase separated, droplet morphology, with well dispersed PDMS domains into the epoxy matrix. The PDMS droplets had diameters as small as 0.6μm, and the droplet size increased up to ca. 1.8μm at 15% PDMS content. Detailed EDS elemental mapping of the fractured composites evidenced siloxane residue in epoxy cavities suggesting incorporation of siloxane into the epoxy network, in agreement with DSC. Flexural testing showed a monotonic reduction of modulus (E) as PDMS content increased, as usually observed in rubber reinforced epoxy resins. However, strain at fracture and toughness increased twofold at about 10wt% PDMS content. Water contact angle increased and then decreased as PDMS content increased, reaching maxima at ca. 10wt% concentration. This behavior was apparently driven by surface roughness. The elastic mechanical modulus was found to scale with the droplet size of the rubbery phase.