One of the major shortcomings preventing the widespread use of epoxy resins in engineering applications is the inherent brittleness of these materials. The incorporation of small amounts of amphiphilic block copolymers into the formulation is one of the most promising strategies to toughen epoxies. These molecules are known to form nanostructures in the epoxy resin that can be preserved upon curing. This strategy is very attractive since significant enhancements in toughness can be obtained without detrimental effects on other properties of the matrix. Despite many examples of successful implementation, an in-depth understanding of the factors that lead to toughness in block copolymer modified epoxies is still elusive. The goal of this dissertation is to understand, first, the deformation mechanisms leading to toughness and, second, how different formulation parameters affect these processes.In this work we used two types of block copolymer modifiers, which produced nanostructures with different physical properties. These block copolymers self-assembled into well-dispersed spherical micelles with either rubbery or glassy cores in various epoxy formulations. Both of these modifiers toughened different epoxy formulations, although to different extents. The rubbery core micelles consistently outperformed the glassy core micelles by roughly a factor of two. While the toughening afforded by the rubbery core micelles was consistent with the current understanding of toughening, the results from the glassy core micelles could not be explained with the same reasoning.In order to understand the deformation mechanisms leading to different levels of toughness, we performed small-angle x-ray scattering experiments while simultaneously deforming our material. This combination of techniques, referred to as in-situ SAXS, allowed us to monitor changes in the structure of the block copolymer micelles as a result of the applied load. With this technique, we showed that the rubbery core micelles undergo a dilatational process while the glassy core micelles deform with constant volume. These results provide definitive evidence of cavitation in rubbery nanodomains, a result anticipated by theoretical calculations. The notion of cavitation is useful in understanding the toughness enhancement of the rubbery core micelles; however, it does not explain the toughening from the glassy core micelles. To explain the toughening afforded by the glassy core micelles we proposed the idea of network disruption in the region spanned by the corona block. We suggested that this mechanism is also capable of initiating plastic deformation of the matrix, although to a lesser extent than cavitation. Accordingly, the main toughening mechanism in block copolymer modified epoxies is plastic deformation of the matrix initiated by either cavitation of rubbery domains or by the zone of disrupted network depending on the properties of the micelle core. Having established that the matrix is responsible for dissipating the most amount of energy during fracture, we also investigated the effect of varying the crosslink density and flexibility of the network by means of in-situ SAXS. In networks formulated with different crosslink densities, but the same type of molecules, we found a correlation between different levels of toughness provided by either, rubbery or glassy core micelles, and differences in deformability of the epoxy network. In networks formulated with a different crosslinker, which incorporates flexible groups into the matrix, we found that the properties of the network strongly influence the type of deformation the block copolymer micelles undergo. In conclusion, this work has established a connection between different extents of toughening enhancement, the physical properties of the block copolymer micelles, and the properties of the epoxy network. Judicious selection of all of these formulation parameters is needed to obtain an optimal toughening effect.