The polyphenylene sulfide/polyphenylene ether (PPS/PPE) alloy is desired for use as an engineering plastic. In this case, microdispersion of PPE in the PPS matrix is preferable. We have developed a new method for the preparation of a PPS/PPE alloy that has microdispersed PPE in the PPS matrix. The reactive processing of PPS with PPE gave a PPS/PPE alloy with a microdispersed PPE in the PPS matrix, using styrene-co-glycidyl methacrylate copolymer (SG) as a compatibilizer. Although the general properties of the PPS/PPE alloy did not depend on the PPE particle size, tensile strength at the weld part is found to be strongly dependent on PPE particle size. Only the finely dispersed PPE system gave tensile strength at the weld part comparable that of PPS. The PPS/PPE alloy shows superior property to PPS at elevated temperature and, moreover, attains the an advantage of precise molding.