A novel polysiloxane (HPS) with epoxy and phenyl groups was synthesized by controlled hydrolysis and condensation of c-(2,3-epoxypropoxy)propytrimethoxysilane (KH560) and diphenyl silanediol. Besides, HPS was used as the compatibilizer of the miscible diglycidyl ether of bisphenol A (DGEBA)/methyl phenyl silicone resin (Si603) blend. The structure and effect of HPS were characterized by Fourier transform infrared spectra, nuclear magnetic resonance ( 1 H-NMR), differential scanning calorimetry, and scanning electron microscopy (SEM). The results showed that HPS could significantly improve the compatibility between epoxy resin (EP) and Si603 resin. In addition, the glass transition temperature (T g ) of the blend increases with increasing amount of Si603 from 129 to 151°C. The thermal stability of blending system was studied by thermogravimetric analysis, derivative thermogravimetric analysis and SEM. The results showed that the incorporation of Si603 into DGEBA resin not only obviously increased the thermal resistance, but also remarkably improved the flame retardancy. The high limiting oxygen index of the HPS/EP/Si603/DDM system at 31 is considered as excellent flame retardancy in the epoxy system.