A selected reactive coupling agent can be served as an effective compatibilizer for certain immiscible and incompatible blends should both blend constituents possess the necessary functional groups that can react with the coupling agent at comparable rates. Solid epoxy resin with two epoxide endgroups per molecule was demonstrated to be an efficient reactive compatibilizer for the incompatible blends of poly(ethylene terephthalate) (PET) and co-polyester liquid crystalline polymer (LCP) by functioning as a coupling agent. The main chain structure of the epoxy resin is neither identical nor miscible with PET and LCP and tends to reside at interface during melt mixing. This preferential residence gives the epoxy compatibilizer greater opportunity to react with both PET and LCP simultaneously to produce the in situ-formed epoxy-b-PET-b-LCP mixed copolymer. This in situ-formed mixed copolymer is highly effective in compatibilizing the PET/LCP blends. This reactive epoxy compatibilizer enhances the LCP fibril formation and results in substantial improvements on stiffness and toughness of the PET/LCP blends.