A novel hyperbranched polysiloxane (HPSi) with a great amount of epoxy groups was synthesized as a compatibilizer of epoxy resin (EP)/methyl phenyl silicone resin (Si603) blends. The structure of HPSi has been analyzed by Fourier transform infrared spectroscopy (FTIR) and nuclear magnetic resonance (¹H-NMR) spectroscopy. The compatibility of EP/HPSi/Si603/DDM was characterized by differential scanning calorimetry (DSC) and scanning electron microscopy (SEM), and the results showed that HPSi significantly improved the compatibility of EP/Si603. The flame retardancy and thermal degradation behavior of the EP/HPSi/Si603/DDM systems were investigated using the limiting oxygen index (LOI), UL-94 vertical burning, thermogravimetric analysis (TG), FTIR and SEM. The LOI value of the modified EP resin with 10% HPSi and 30% Si603 was 31 (about 1.4 times the corresponding value of the original EP resin), and passed V-1 of the UL-94 rating. Specifically, its combustion residue at 800 °C was about 2.24 times that of the original EP resin. Moreover, structural analysis of the combustion residue by FTIR showed the formation of polyaromatic carbons. Additionally, the morphology of the residue char showed the compact, smooth, and tight structure of the EP/HPSi/Si603/DDM systems. Mechanical properties such as tensile strength, flexural strength and flexural modulus of EP/DDM and EP/HPSi/Si603/DDM systems were evaluated and the result showed that these polymers also possess good mechanical properties. These outstanding integrated properties would make EP/HPSi/Si603/DDM systems attractive for practical applications.