A novel method is used for preparing liquid rubber-toughened epoxy blend, in which an initiator was added to the liquid rubber–epoxy mixture to initiate crosslinking reaction of liquid rubber, and then curing agent was added to form the thermoset. Two epoxy blends with carboxyl-terminated butadiene-acrylonitrile copolymers were prepared using traditional and novel methods respectively. Results indicated that the novel rubber-toughened epoxy blend exhibited much better mechanical properties than its traditional counterpart. The morphologies of the blends were explored by transmission electron microscopy (TEM), it was revealed that the use of the novel method formed a local interpenetrating network structure in the blend, which substantially improved the interfacial adhesion. The impact fracture surfaces of the two blends were observed by scanning electron microscopy (SEM) to explore the toughening mechanism, it was found that crack pinning was the major toughening mechanism for the novel rubber-toughened epoxy blend. Dynamic mechanical analysis (DMA) was applied to determine the Tg values of the blends, which were found to be close. © 2014 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2014, 131, 41110.