The vitrification effect during the curing reaction of ATBN modified epoxy resin was studied by the differential scanning calorimetry and a new reaction kinetic equation was derived to describe the effect of vitrification on the reaction rate at both glassy and rubbery state of reactants. The solution viscosity of the blend was measured by dynamic mechanical spectroscopy to investigate the rheological effect on the phase separation behavior. The ATBN was added to improve the impact properties of the cured epoxy resin. The phases separation behavior during the curing reaction was analyzed by the light scattering and turbidity experiments. From the result of the cloud point measurements, it was observed that the ATBN-epoxy system showed UCST behavior. As the molecular weight (conversion) of epoxy resin increased, the UCST curve was shifted toward higher temperature region and became bimodal form. The transmitted light intensity was measured and it showed the onset point and later stage of the phase separation. The turbidity increased as the content of ATBN was increased. The scattered light intensity with time showed the formation of the dispersed domain and the mechanism of the phase separation. The domain correlation length was calculated from the angle of the maximum scattered light intensity. From the result of the light scattering experiment, The domain correlation length increased as the content of ATBAN was increased and as the curing temperature was decreased. Above about 20\% of ATBN, the phase inversion occurred and epoxy resin became the dispersed phase. The impact strength and dynamic mechanical properties of the blend with different ATBN content and curing temperature were observed and the effect of phase separation on these properties were analyzed.