Block ionomer complexes based on sulfonated polystyrene-block- poly(ethylene-ran-butylene)-block-polystyrene (SSEBS) and a tertiary amine-terminated poly(ε-caprolactone), denoted as SSEBS-c-PCL, were used to toughen epoxy resin. Well-dispersed spherical microdomains, consisting of a poly(ethylene-ran-butylene) core surrounded by a sulfonated polystyrene shell, were revealed by transmission electron microscopy (TEM) and small-angle X-ray scattering (SAXS) in the cured epoxy blends with 10 wt % SSEBS-c-PCL of various compositions. Structural parameters, core radius (R c), effective hard-sphere radius (R hs), and shell thickness (T s) were obtained by fitting the SAXS data with a core-shell model and, for the first time, correlated with the fracture toughness (critical stress intensity factor K IC and strain energy release rate G IC) of the epoxy blends. K IC and G IC were found to increase with increasing R c and R hs but decrease with T s. The blend containing SSEBS-c-PCL with least PCL, i.e., 2.4 wt %, shows nanostructure of the largest R c and R hs, and smallest T s, displaying highest K IC and G IC. Examination of the fracture surfaces indicates that the increased toughness arises from interfacial debonding of spherical microdomains and plastic expansion of resultant nanovoids, followed by small-scale matrix shear deformation. The correlations between nanostructure parameters and fracture toughness have provided a fundamental understanding of nanostructure toughening of thermosets via an innovative strategy based on block ionomer complexes.