A method of preparing a naphthol-modified phenolic resin comprising adding a naphthol, a phenol and an acid catalyst selected from the group consisting of a strong acid, a super acid and a mixture thereof to a phenolic resin to obtain a mixture, heating the mixture under ambient pressure at 120.degree. to 180.degree. C. for 1 to 12 hours to obtain a reaction mixture, and subjecting the reaction mixture to vacuum concentration and/or steam distillation to obtain the naphthol-modified phenolic resin.