Novolac–phthalonitrile polymers bearing a controlled concentration of phthalonitrile groups were synthesized by condensation of novolac with 4‐nitrophthalonitrile. The cure characteristics monitored by DSC and rheometry indicated acceleration of the cure reaction by the phenolic groups. Fourier transform infrared analysis of the cured products indicated that the cure mechanism was dependent on the extent of phthalonitrile substitution. In phenol‐rich systems, evidence was obtained for the phenol‐mediated reaction of nitrile groups resulting in the formation of isoindoline groups. The phthalonitrile‐rich system underwent crosslinking through formation of triazine and phthalocyanine groups. The phenol groups in the phthalonitrile backbone were conducive to building a stronger interphase in their carbon composites, resulting in better mechanical properties. This was corroborated by morphological studies by SEM. However, these groups were detrimental to the thermal stability of the cured resins. The polymers exhibited very high flame retardancy which improved further on increasing the degree of phthalonitrilation. Copyright © 2012 Society of Chemical Industry Phenol‐containing phthalonitrile oligomers curing at lower temperatures to a network comprising of isoindoline, triazine and phthalocyanine were synthesized.