Melt blending of polypropylene (PP) with a low molecular weight (MW) crosslinkable unsaturated polyester (UP) was studied in a batch mixer and a twin-screw extruder in the presence of peroxide (POX) free radical initiator. Competing degradation and crosslinking reactions of the peroxide with the blend components leading to significant change in their viscosity ratio were studied and controlled during the blending process. Rheological studies show that depending on the process conditions some reacted PP/UP blends have a pronounced suspension behavior due to the presence of the dispersed polyester gel particles in a low MW PP matrix. It is also evident from SEM analysis that the reacted blends have a more uniform and finer morphology than the unreacted ones. The blends are also characterized by FTIR, which strongly suggests the presence of "block" or "graft" PP-UP structures that may enhance phase interaction and promote compatibility in the reacted PP/UP blends. Such blends are considered as suitable compatibilizers of PP/high MW thermoplastic polyester blends and as modifiers for low density extrusion foaming of similar blends.