The compatibilizing effect of poly (epsilon-caprolactone) (PCL) on the blends of two immiscible polymers, poly(hydroxy ether of bisphenol A) (phenoxy) and poly(styrene-co-acrylonitrile) (SAN) has been investigated. The phase behavior of the ternary blends was affected by the AN content in the SAN copolymers and a maximum miscible region was observed at 19.5 wt % of AN. The effect of AN content on the phase behavior of the ternary blends was interpreted in terms of the relative magnitude of the segmental interaction energy densities, which were obtained by combining a melting point depression and an extended binary interaction model. When a small amount of PCL was added to the phenoxy/SAN blends, the phase morphology showed a finer phase dispersion, indicating that the interfacial tension between the phenoxy and SAN is considerably reduced. However, the improvement in tensile properties was limited despite the morphological change with the PCL content. From the results of the DSC measurements, SEM, and tensile testing, it was understood that the PCL acted as a compatibilizer for the immiscible phenoxy/SAN blends.