The impact strength of blends consisting of polystyrene (PS) and ethylene-propylene-diene rubber (EPDM) could be increased by adding a poly(styrene/ethylene-propylene) (SEP) compatibilizer and an organic peroxide during reactive extrusion. The increased impact strength could be related to an enhanced adhesion between the dispersed EPDM phase and the PS matrix, as a consequence of radical graftlink or co-crosslink reactions between the rubbery part (EP) of the compatibilizer and the dispersed EPDM rubber. The morphology of the blend proved to be dependent upon the type and amount of peroxide used, as well as on the residence time (feeding position) of the peroxide in the extruder. The dependence of the mechanical properties of the blends on the type and concentration of peroxide used, is discussed in relation to the distribution of the peroxide between the PS and the EPDM phases.