A single-phase melt of the isotactic polypropylene (iPP)/hydrogenated poly(styrene-co-butadiene) (hSBR) blend, which has a virtual upper critical solution temperature (UCST)-type phase boundary below the melting point of iPP (T-m), was prepared at 50/50 wt, ratio and quenched below UCST. By transmission electron microscopy and dynamic mechanical analysis, the blend was shown to be a phase-separated material in which hSBR-rich domains with uniform diameter of ca. 20 nm are dispersed in an iPP-rich matrix. The regular structure is believed to be formed by spinodal decomposition which is pinned at an early stage by crystallization in the iPP-rich region. The blend showed good strain recovery after large deformation, suggesting a potential for a new class of thermoplastic elastomer. Wide-angle X-ray diffraction (WAXD) studies showed that iPP crystallites in the blend are smaller than those in neat iPP and there exists an optimum size of ca. 10 nm (crystal size by the Scherrer equation) for this strain recovery. Such crystallites suffered from less plastic deformation and were hardly oriented under bulk deformation. That is, the crystallites that developed in the presence of polymer impurity (hSBR) seem to be different from those in neat iPP, and play the role of tie points to provide the elastomeric character of the matrix itself.