The phase morphology and the mechanism of the compatibilization in ternary blends of PET/EBM (ethylene buten rubber)/ionomer (partially neutralized ethylene and methyl methacrylic acid copolymer, EMAA) are examined. Applying the repulsion idea in random copolymer, the ionomer was selected as an encapsulating agent to compatibilize PET/EBM blend. As anticipated, the ionomer can encapsulate EBM in PET matrix and effectively compatibilize PET and EBM. The results of droplet sandwich experiments verified that the actual driving force for the encapsulation is wettability. In addition, this wettablility was found to be realized by the contribution of the polar and nonpolar units in the ionomer: The polar units decrease the interfacial tension between PET and the ionomer, and the nonpolar units decrease that between EBM and the ionomer. The metal ions in the ionomer have little influence on the wettability, and consequently EMAA can encapsulate EBM even when unneutralized. The efficiency of the compatibilization, on the other hand, is not determined by the wettability only, and the metal ions play an important role. EMAA can effectively compatibilize EBM and PET only when neutralized. This compatibilization effectiveness of the ionomer is supposedly due to the strong interaction between PET and the metal ions. (C) 2004 Wiley Periodicals, Inc.