A high-molecular-weight novolak type substituted phenolic resin having a number average molecular weight of at least 1500 is prepared by reacting (A) (i) a phenol comprised mainly of a bifunctional phenol or (ii) a low-molecular-weight novolak type substituted phenolic resin derived from this phenol and an aldehyde with (B) a chain extender selected from the group consisting of (i) a dimethylolated product of a bifunctional or trifunctional phenol, (ii) a low-molecular-weight resol type substituted phenolic resin derived from a phenol comprised mainly of a bifunctional phenol and an aldehyde, (iii) an aldehyde, (iv) a ketone, (v) a diol and (vi) a dihalide in the presence of an acid catalyst, with the proviso that if the reactant (A) is the phenol (i), the chain extender is the resol type substituted phenolic resin (ii).The molecular weight of this novolak type substituted phenolic resin is much higher than the molecular weights of conventional novolak type phenolic resins, and if this phenolic resin is incorporated into various setting type resins, the heat resistance and mechanical properties of these resins can remarkably be improved.