In Part 1 of this series (Polymer 1999;40:3685), the concept for the preparation of expandable polystyrene (PS) applying water as a blowing agent was presented. In order to achieve this goal, water was emulsified by means of a commercially available surfactant (sodium bis(2-ethylhexyl)sulfosuccinate) in a prepolymerised styrene/PS mixture. This mixture was subsequently suspended in water and polymerisation was continued to complete conversion. This procedure resulted in spherical PS beads containing tiny water droplets which were capable of expanding the material upon heating above its glass transition temperature. In certain cases (especially at high surfactant concentrations), miscibility problems between the surfactant and the PS matrix caused unstable systems during polymerisation. For this reason, a new technique was developed to synthesise in-situ amphiphilic copolymers with good miscibility in the PS matrix. This novel route to incorporate very finely dispersed water into polystyrene is described in this paper. This procedure also has potential for the preparation of amphiphilic species with other applications, e.g. as detergents, dispersants, in the enhanced oil recovery, etc., since a very simple radical copolymerisation is applied, whereas the syntheses of most surfactants require a relatively complicated reaction sequence.