Blends of polybutylene terephthalate (PBT) with very low-density polyethylene (VLDPE) have been studied. The blends are immiscible owing to the differences in the polarities of the component polymers. Thermal studies using a differential scanning calorimeter showed that the blending does not change the crystallinity and non-isothermal crystallization behavior of PET. The tensile strength and modulus showed gradual decrease with increase in VLDPE content. The impact strength, however, was found to increase marginally with increasing VLDPE content. The examination of fractured surfaces using scanning electron microscopy indicated a two-phase morphology with spherical domains of VLDPE dispersed in PET matrix. Addition of ethylene-based compatibilizers resulted in significant improvements in the mechanical properties through modification of phase morphology and interfacial adhesion. The effectiveness of the compatibilizers has been explained on the basis of possible interaction between the reactive groups present in the compatibilizer and the polymer. The presence of such bonding reaction leading to better interfacial properties has also been confirmed using lap shear measurements. (C) 2000 John Wiley & Sons, Inc.