In the present work, maleic anhydride was used for grafting polypropylene (PP) by a free radical reaction in the melt and subsequent blending with highly crystalline polyethylene terephthalate (PET), to determine how functionalization and blending influence their properties. The optimum conditions for the grafting reaction of PP were found, and degree of grafting was measured by the carbonyl index using a Fourier transformer infrared spectrophotometer. Both noncompatibilized and compatibilized PP/PET blends of different compositions were prepared in a laboratory mixing extruder. They were characterized by differential scanning calorimetry to observe their thermal behavior, by scanning electron microscopy to study their particular morphology, and by water vapor permeability measurements to determine their water barrier performance. For compatibilized blends, a partial solubility of PP in PET longer chains and the development of a complex morphology were seen.