A multifunctional epoxy resin has been demonstrated to be an efficient reactive compatibilizer for the incompatible and immiscible blends of polyamide-6 (PA 6) and polybutylene terephthalate (PBT). The torque measurements give indirect evidence that the reaction between PA and PET with epoxy has an opportunity to produce an in situ formed copolymer, which can be as an effective compatibilizer to reduce and suppress the size of the disperse phase, and to greatly enhance mechanical properties of PA/PBT blends. The mechanical property improvement is more pronounced in the PA-rich blends than that in the PET-rich blends. The fracture behavior of the blend with less than 0.3 phr compatibilizer is governed by a particle pullout mechanism, whereas shear yielding is dominant in the fracture behavior of the blend with more than 0.3 phr compatibilizer. As the melt and crystallization temperatures of the base polymers are so close, either PA or PET can be regarded as a mutual nucleating agent to enhance the crystallization on the other component. The presence of compatibilizer and in situ formed copolymer in the compatibilized blends tends to interfere with the crystallization of the base polymers in various blends.