A series of blends were prepared by adding a Polyurethane (PUT) in varying proportions to diglycidyl ether of bisphenol A epoxy resin (DGEBA) cured with p-diamino diphenyl sulfone (DDS). The microstructure and thermo-mechanical properties were investigated as a function of the concentration of PUT and curing conditions. The thermal properties, measured by differential scanning calorimetry and thermogravimetric analysis showed that PUT could enhance the glass transition temperature (Tg) of the DGEBA epoxy resin and retain its thermal stability. The microstructure changed from sea-island to phase-inverted structure with the various concentrations of PUT. The fracture toughness, expressed as notched impact strength, increased with the addition of PUT and made the maximum value with 15-phr PUT. Fracture mechanisms such as crack deflection and branches, ductile microcracks, ductile tearing of the thermoplastic was responsible for the increase in the fracture toughness of the blends.