Toughening of epoxy resins for improvement of crack resistance has been the subject of intense research interest during the last two decades. Epoxy resins are successfully toughened by blending with a suitable liquid rubber, which initially remains miscible with epoxy and undergoes a phase separation in the course of curing that leads to the formation of a two-phase microstructure, or by directly blending preformed rubbery particle. Unlike the situation for thermoplastics, physical blending is not successful for toughening epoxy resins. Recent advances in the development of various functionalized liquid rubber-based toughening agents and core-shell particles are discussed critically in this review.