A binary alloy of poly(methyl methacrylate) (PMMA) and poly(ethylene-co-vinylacetate) (EVA) prepared by polymerization-induced phase decomposition had a two-phase structure, in which PMMA particles with uniform size were regularly dispersed in an EVA matrix, even when EVA was the minor component (e.g. 20%). This alloy exhibited high impact strength, high heat resistance and a high Young’s modulus close to that of PMMA. To understand the morphology-properties relationship, we undertook a two-dimensional finite element method analysis of the deformation mechanism. A two-phase model was constructed so that four particles of PMMA were embedded in the EVA matrix. When the volume fraction of PMMA was close to 1, the model behaved as a rigid and deformable material even though PMMA was the dispersed phase. The rigid character seems to be caused by a stress concentration on the PMMA particles which are forced to dilate, especially when the particle-to-particle ligament thickness is small. The high impact strength was also interpreted in terms of the stress concentration on PMMA particles; i.e. the brittle PMMA can undergo plastic deformation induced by the large compressive stress evolved by bulk deformation, so that the impact energy is absorbed by the plastic deformation.