Superior impact properties were obtained when maleic anhydride grafted styrene ethylene/butylene styrene block copolymer (SEBS-g-MAH) was used as a compatibilizer in blends of polyamide 6 (PA 6) and isotactic polypropylene (PP), where polyamide was the majority phase and polypropylene the minority phase. The optimum impact proper-ties were achieved when the weight relation PA : PP was 80 : 20 and 10 wt% SEBS-g-MAH was added. The blend morphology was systematically investigated. Transmission electron microscopy (TEM) indicated that the compatibilizer forms a cellular structure in the PA phase in addition to acting as an interfacial agent between the two polymer phases. In this cellular-like morphology the compatibilizer appears to form the continuous phase, while polyamide and polypropylene form separate dispersions. In microscopy, PA appeared as a fine dispersion and PP as a coarse dispersion. The mechanical properties indicated that in fact PA, too, is continuous, and the blend can be interpreted as possessing a modified semi-interpenetrating network (IPN) structure with separate secondary dispersion of PP. The coarser PP dispersion plays an essential role in impact modification. Binary blends of the compatibilizer and one blend component were also investigated separately. The same cellular structure was observed in the binary PA/SEBS-g-MAH blends, and SEBS-g-MAH again appeared to form the continuous phase when the elastomer concentration was at least 10 to 20 wt%. By contrast, in PP/SEBS-g-MAH only conventional dispersion of elastomeric SEBS-g-MAH was observed up to 40 wt% elastomer. Impact strength was improved and the elastic modulus was lowered in both PA/SEBS-g-MAH and PP/SEBS-g-MAH blends when the elastomer content was increased. The changes in modulus indicate that the semi-IPN-like structure is formed in the binary PA/SEBS-g-MAH blends as well as in the ternary structure.