Novel oxazolidinone-modified epoxy resins are prepared by reacting a polyglycidyl ether of a polyhydric compound such as the diglycidyl ether of bisphenol A with cyanuric acid or thiocyanuric acid at a temperature in the range of 130* to 180* C. The oxazolidinone-modified epoxy resins prepared in this manner have a different structure and exhibit greater Izod impact strengths as compared to the oxazolidinone-modified epoxy resins prepared from polyisocyanates and polyglycidyl ethers.