Resole phenolic resins were modified by forming copolymers with Cardanol, which is the main component of Cashew nut shell liquid (CNSL). The modified phenolic resins were prepared at various mole ratios of phenol to cardanol and the polymerization was carried out under basic conditions. In the synthesis a maximum content of 40% of Cardanol in the resin was possible to obtain, as a higher Cardanol content resulted in the formation of a resin with an extremely high viscosity. The effect of replacement of phenol by Cardanol on the thermal and mechanical properties of resole resins was experimentally investigated. An increases in the content of Cardanol resulted in a proportional increases in flexibility and the fracture toughness together with a decreases in the flexural modulus of the cured resins. The higher toughening effect of replacing phenol with Cardanol was obtained with the total Phenol:Formaldehyde ratio of 1.0:1.25 in the synthesis of the resin. Also a direct proportionality between the amount of Cardanol incorporated in the resins and the decreases in the crosslink density was observed.