Dynamics of phase separation in a polymerizing system, consisting of carboxyl terminated polybutadiene acrylonitrile/epoxy/methylene dianiline, was investigated by means of time-resolved light scattering. The initial length scale was found to decrease for some early periods of the reaction which has been explained in the context of nucleation initiated spinodal decomposition We have combined the Cahn-Hilliard kinetic equation and polymerization kinetics, and predicted the initial reduction of the length scale triggered by nucleation.