A novel series of hydroxyl terminated bisphenol-A type novolac epoxy resins modified with propionic acid (MEP) were prepared by one-step ring-opening reaction process in the presence of tetramethylammonium bromide catalyst. The obtained MEP was characterized using FTIR, 1HNMR analyses. In addition, Intercross-linked epoxy-polyurethane composites networks were also obtained by curing reaction among MEP, cross linker polyisocyanate IL1351 and phthalic anhydride. The thermal characteristics of the epoxy-polyurethane composites were determined by thermogravimetric analysis (TGA). The thermal stability of the cured MEP with different ring-opening rate and cured alkyd polyol A450 were compared. The results showed that the obtained epoxy-polyurethane composites had much better thermal stability than the conventional polyurethane system A450/IL1351, and the thermal stability of them was correlated to the content of MEP.