Phase separating rubbers are a well-documented toughening additive to epoxies. However, their effectiveness begins to plateau as the loading approaches 10 phr. To better understand this phenomenon, we directly compared the mechanical, thermomechanical, fracture properties and toughening mechanisms of the diglycidyl ether of bisphenol-A (DGEBA)/m-phenylenediamine (mPDA) system (Tg = 154 °C) toughened with carboxyl-terminated butadiene-acrylonitrile (CTBN) and the triblock copolymer poly(styrene)-block-poly(butadiene)-block-poly(methylmethacrylate) (SBM), respectively. The SBM formed a nanostructured thermoset and thus was a more efficient toughening agent than CTBN, which forms micron scale, rubbery inclusions in the epoxy. At 10 phr SBM, the fracture toughness (MPa*m1/2) was increased by 220%, while the 10 phr CTBN modified epoxy containing 18 and 26% acrylonitrile showed 60 and 80% increases, respectively. Unlike the CTBN modified epoxy, SBM increased the fracture toughness with increasing concentration. Fracture surface analysis of the SBM modified epoxy via scanning electron microscopy identified the toughening mechanism as cavitation of ∼100 nm spherical micelles, void growth of the epoxy and concomitant matrix shear yielding. While both the CTBN and SBM modified epoxy exhibit similar toughening mechanisms, the nanoscopic SBM particles had an interparticle distance one order of magnitude smaller than that of the CTBN modified epoxy. Thus, a finer dispersion of nanoscopic, spherical micelles resulted in massive plastic deformation of the epoxy upon activation of cavitation, void growth and matrix shear yielding toughening mechanisms. Finally, dynamic mechanical analysis indicated that SBM did not decrease epoxy Tg, while the Tg of CTBN modified epoxy decreased with both increasing concentration and acrylonitrile content.