For a rubber-toughened piperidine-DGEBA epoxy resin, the interface between the rubber particle and the epoxy resin matrix was modified by an epoxide end-capped carboxyl terminated butadiene and acrylonitrile random copolymer (CTBN). The end-capping epoxides used were a rigid diglycidyl ether of bisphenol-A (Epon 828), a short-chain flexible diglycidyl ether of propylene glycol (DER 736), and a long-chain flexible diglycidyl ether of propylene glycol (DER 732). The microstructures and the fracture behaviour of these rubber-modified epoxy resins were studied by transmission electron microscopy and scanning electron microscopy. Their thermal and mechanical properties were also investigated. In the rubber-modified epoxy resins, if the added CTBNs were end-capped by a flexible diglycidyl ether of propylene glycol (DER 732 or DER 736) before curing, the interfacial zone of the underformed rubber particle, the degree of cavitation of the cavitated rubber particle on the fracture surface and the fracture energy of the toughened epoxy resin were all significantly increased. The toughening mechanism based on cavitation and localized shear yielding was considered and a mechanism for the interaction between cavitation and localized shear yielding that accounts for all the observed characteristics is proposed.