The effects of a controlled heat-setting treatment on the properties and microstructure of biaxially stretched poly(ethylene terephthalate) (PET) and poly(ethylene-2,6-naphthalene dicarboxylate) (PEN) films are described. Substantial changes in crystalline fraction, crystallite size, glass transition temperature and significant enhancement in dimensional stability are observed for both film types upon increase in heat-set temperature. A distinct melting peak in the vicinity of the heat-set temperature, observed in differential scanning calorimetry thermograms for both materials, is shown to be an effective marker of the heat-setting process underlying the dual nature of the morphology of the heat-treated films. We also observe that the PET films undergo significant molecular realignment on heat setting, while the orientation of the PEN films is only weakly modified by the heat-set conditions. A morphological transition is detected for both films at high heat-set temperatures (T-HS*) near the onset of the primary melting range, marking a qualitative change in the physical response of the biaxially oriented films; Measurable drop in planar orientation and glass transition temperature, and a sharp rise in crystallite size are noted for films heat-treated above T-HS*. The morphological models of previous workers (Schultz et al. and Fischer and Fakirov), invoking the idea of fibrillar-to-lamellar transformation, are used to explain some of our observations.