Alloying polybenzoxazine with liquid rubber was studied in order to overcome its brittleness. We used three kinds of liquid rubber having different functional groups at the chain-end, which are amino, carboxyl and methoxyl groups, namely ATBN, CTBN and ETBN, respectively, to examine the effect of liquid rubber terminal groups on the polymerization of a typical benzoxazine monomer, F-a, and the compatibility with the polybenzoxazine, PF-a. DSC analysis revealed that ATBN and CTBN were effective modifier for lowering the onset temperature of the ring-opening polymerization of F-a. PFa/ATBN hybrid films exhibited high homogeneity throughout wide range of weight ratios of ATBN due to acid-base interaction between the phenolic groups of PF-a and the amino terminal groups of ATBN as confirmed by SEM. Viscoelastic measurement of the hybrids revealed improvement in toughness for the hybrids having low content of ATBN. Moreover, increase of the glass transition temperature of the polybenzoxazine was observed by the hybridization with ATBN. Thermogravimetric analyses revealed that the addition of liquid rubber also enhanced the thermal stability of the polybenzoxazine.