Toughening mechanisms of two different rubber-modified polymers, namely, rubber-toughened PMMA (RT-PMMA) and MBS resin, were investigated by transmission electron microscopy (TEM) and finite element analysis (FEA). The TEM result showed that in typical RT-PMMA, micro-craze formation in crack-tip region is the primary toughening mechanism. On the other hand, in a type of MBS, large plastic deformation of rubber particles and the surrounding matrix resin was observed in a limited area in the vicinity of crack-tip. FEA was performed to simulate these different types of damage mechanism in crack-tip region. For the damage formation in RT-PMMA, a damage model was applied to simulate damage zone formation in the crack-tip region in the macro-scale analysis and micro-crazing in the surroundings of rubber particles in the micro-scale model. It was shown that the damage model was successfully applied to predict these damage formations. For the plastic deformation in MBS, it was assumed that heat generation in the vicinity of crack-tip plays an important role in the formation of such large-scale deformation. Therefore, dynamic nonlinear FEM analysis was performed to analyze the heat generation in the crack-tip region. It was shown that the crack-tip temperature rose up to about 80°C, suggesting increase of ductility in the crack-tip region.