A phenolic resin that increases its toughness by polydimethylsiloxane and a process of preparing the same is provided. Polydimethylsiloxane is added as a coupling agent in a .gamma.-glycidoxypropyltrimethoxysilane-modified phenolic resin to improve the compatibility between polydimethylsiloxane and the phenolic resin. Then, tetraethoxysilane is added to conduct hydrolysis condensation and obtain tougher and thermally stable phenolic resin.