Toughening mechanisms in blends containing 60 parts nylon 6,6, 20 parts polypropylene (PP) and 20 parts styrene-ethylene/butylene-styrene (SEBS) grafted to different levels of maleic anhydride (MA) were investigated. The sequence of events was carefully characterised using different microscopic techniques. It was found that under triaxial constraint interfacial cavitation followed by multiple crazing and subsequently massive shear yielding of the matrix contributed to an enormous toughening effect in core-shell microstructures observed in 0.92%-maleated blend (0.74% in Part I paper [Wong SC, Mai Y-W. Polymer, 1999;40:1553], should be 0.92% as corrected in this paper). The core-shell structure was formed when the spherical domains of PP were surrounded by SEES rubber in a nylon-rich matrix.. In this composition, miscibility between the dispersed SEBS-g-MA and the nylon phase was maximised as revealed by thermal-mechanical analysis. The SEES was most effective in toughening the nylon/PP blends when it cavitated to introduce ligament bridges between debonded PP particles at the crack tip. Interfacial cavitation and multiple crazing served to relieve the hydrostatic tension ahead of crack growth and subsequently enhanced the shear-yielding component of stresses in the matrix material. Other blend compositions that did not show controlled cavitation resulted in little plastic flow surrounding the crack tip and reduced fracture toughness. These results reinforced the notion that cavitation of SEES at the nylon-PP interface was an essential mechanism to promote toughening in materials subjected to high crack tip triaxiality. (C) 2000 Elsevier Science Ltd. All rights reserved.