Conventional toughening agents are typically rubbery materials or small molecular weight molecules, which mostly sacrifice the intrinsic properties of a matrix such as modulus, strength, and thermal stability as side effects. On the other hand, high modulus inclusions tend to reinforce elastic modulus very efficiently, but not the strength very well. For example, mechanical reinforcement with inorganic inclusions often degrades the composite toughness, encountering a frequent catastrophic brittle failure triggered by minute chips and cracks. Thus, toughening generally conflicts with mechanical reinforcement. Carbon nanotubes have been used as efficient reinforcing agents in various applications due to their combination of extraordinary mechanical, electrical, and thermal properties. Moreover, nanotubes can elongate more than 20% without yielding or breaking, and absorb significant amounts of energy during deformation, which enables them to also be an efficient toughening agent, as well as excellent reinforcing inclusion. Accordingly, an improved toughening method is provided by incorporating nanotubular inclusions into a host matrix, such as thermoset and thermoplastic polymers or ceramics without detrimental effects on the intrinsic physical properties of the matrix.