A novel graft copolymer (PE-g-LCP) consisting of polyethylene (PE) backbones and liquid crystalline polymer (LCP) branches was synthesized via reactive blending of an acrylic acid-functionalized PE (Escor 5000 by Exxon) with a semiflexible LCP (SBH 1 : 1 : 2 by Eniricerche S.p.A.). The crude reactive blending product (COP) was shown by investigation of the fractions soluble in boiling toluene and xylene and of the residue to contain unreacted Escor and SBH, together with the graft copolymer forming the interphase. The compatibilizing activity of COP for PE/SBH blends, compared to that of pure Escor, was investigated using two PE grades. The COP addition into 80/20 PE/SBH blends caused a much stronger reduction of the SBH droplet dimensions and morphology stabilization than did that of pure Escor. The rheological behavior of the samples showed that COP leads to a slight increase of interfacial adhesion in the melt as well and that the effect is more pronounced when lower molar mass PE grade is used as the blend matrix. Melt-spinning tests demonstrated that deformation of the SBH droplets into highly oriented fibrils can be obtained for the blends of lower molar mass PE, compatibilized with small amounts of the novel PE-g-SBH copolymer.