The "in-situ" compatibilization for a PET/LCP blend via transesterification reactions in a twin-screw extruder having a very short residence time is investigated through thermal, rheological, and mechanical studies. Inclusion of a small amount of liquid crystalline polymer (LCP) enhanced the crystallization rate of the poly(ethylene terephthalate) (PET] matrix. It acted as a nucleating agent. LCP lowered the blend viscosity above T-cn (crystalline-nematic transition temperature), working as a processing aid. However, the addition of dibutyltindilaurate (DBTDL) as a reaction catalyst was found to increase the viscosity of the blends, diminish the size of the dispersed phase, enhance its adhesion with the matrix, and lead to an increase of mechanical properties of two immiscible phases. Hence DBTDL is helpful in producing a reactive compatibilizer by reactive extrusion at the interface of this polyester blend system. The optimum catalyst amount turned out to be about 500 ppm when the reaction proceeds in 90/10 PET/LCP polyester blend systems. Its effect on the mechanical properties is discussed in detail. The structural change of reactive blend was identified by H-1 NMR and wide angle X-ray diffraction patterns.