From an analysis of the literature and our experimental results, we have established that interfacial tension is a function of the concentration of a compatibilizer, and put forward a ’three-stage’ physical model to account for the compatibilizing behaviour of polymer blends. The effect of compatibilizer on size of the dispersed phase is studied in binary incompatible blends. The relation between the interfacial area occupied by each compatibilizer molecule and the concentration of the compatibilizer is also studied.