Transesterification reactions between poly(ethylene terephthalate) (PET), hydroquinone diacetate (HQDA), and terephthalic acid (TA), were conducted via the melt polymerization route with the objective of analyzing the copolyesterification kinetics of a phase separated system. At first homopolymerization of HQDA and Th were conducted at 50 mol % composition of each monomer. Then the polymerization kinetics of four compositions [PET 30/70 (HQDA + TA), PET 40/60 (HQDA + TA), PET 50/50 (HQDA + TA), PET 60/40 (HQDA + TA) with 30 : 35 : 35, 40 : 30 : 30, 50 : 25 : 25, and 60 : 20 : 20 mol % PET, HQDA, and TA] were investigated. The following assumptions were made to make kinetic analysis tractable. HQDA and TA combine to form acetic acid and higher oligomers. The oligomer subsequently adds on to the FET chain to give a copolymer of PET/HQDA/TA, the product of interest. The reaction between PET, HQDA, and TA proceeds in a heterogeneous two-phase system consisting of PET-rich and PET-poor regions. The reaction sequence is HQDA and TA react to form a dimer and subsequently the dimer is added onto the PET chain. This reaction sequence is assumed to be valid for the PET-rich and PET-poor phases. Both these reactions were assumed to be second order with respect to the reactants. Reactions wherein the dimer reacts with HQDA or TA to form acetic acid exist, but the probabilities of these processes are small with respect to the main reaction postulated above, thus maintaining the overall mass balance. Moles of acetic acid found experimentally were computed using a standard procedure. The rate constant k under the conditions of phase separation was determined. The rate constant in the presence of PET was higher than that observed in the HQDA and TA reaction. An Arrhenius plot revealed that the catalyst plays a marginal role. Microscopic analysis revealed that the HQDA and TA polymer were nonmelting while copolyesters FET 30/70 (HQDA + TA) to PET 60/40 (HQDA+ TA) melted and were liquid crystalline.