The effects of two different styrene-ethylene/butylene-styrene (SEBS; SEBS-g-MA) block copolymers as potential compatibilizers for thermoplastic polyurethane/isotactic polypropylene blends (TPU/iPP), at different composition were investigated. The compatibilizers involved are unfunctionalized SEBS and functionalized grades containing maleic anhydride grafted to the midblock (SEBS-g-MA). Compatibility of each TPU/iPP/SEBS and TPU/iPP/SEBS-g-MA polymer blend was compared investigating mechanical, morphological, thermal and interfacial properties. From the results of the interfacial surface free energy, SEBS-g-MA is optimal compatibilizer which located at the interface of TPU and iPP phase exhibited much better synergy and improved the compatibility between the TPU and iPP phase. Accordingly, TPU/iPP/SEBS-g-MA showed better mechanical properties (higher tensile strength, elongation at break, and E modulus) and finer and more stable morphologies that were clearly observed by scanning electron microscopy. The thermogravimetric analysis confirmed these results showing pronounced thermal stability by addition of functionalized compatibilizer. POLYM. ENG. SCI., 58:1911-1922, 2018. (c) 2017 Society of Plastics Engineers