Blends of carboxyl functionalized poly(phenylne sulfide) (PPS) and poly(ethylene tetraphthalate) (PET) were shown to undergo an ester interchange reaction during melt blending. Pendent carboxyl functionality randomly incorporated along the PPS chain reacts with the ester moiety of PET to form a graft copolymer. A model compound, 2,4-bis(phenylthio, benzoic acid), has been synthesized to assist in defining the level of carboxyl functionality on the PPS chain. Evidence of the grafting reaction has been gathered from infrared spectroscopy, solubility measurements, and electron microscopy. When added to blends of PPS and PET homopolymers, the graft copolymer significantly reduces the average domain size of the dispersed phase across the entire composition range. This study describes the role that graft copolymers formed by ester interchange reactions can play in compatibilizing this immiscible blend system, with particular focus on the conditions leading to increased grafting efficiency.