Phase Separation of a prereacted rubber in di-, tri-, and tetrafunctional epoxy systems is discussed. Optical microscopy and laser light scattering are used to characterize the morphology and dimensios of the rubbery domains. Systems without rubber are transparent while systems containing 2%, 4%, 6%, and 8% and rubber exhibit distinct phase separation. The average domain size is about 1 μm In the 8% systems the particles are larger and in the trifunctional system the rubbery domains are in the shape of shell and core. Laser light scattering proves that the scattering particles are in the core observed in the optical micrographs. The difference in morphologies is explained by the difference in the chemical structure of the epoxy resin and the rubber content. Thermodynamic considerations and solubility parameters show that the di- and tetrafunctional systems have similar enthalpies of mixing while the trifunctional system is much more incompatible with the rubber.