This paper deals with the development of a compatibilized polymer blend based on poly(2,6-dimethyl-1,4-phenylene ether) (PPE) and poly(butylene terephtalate) (PBT). Blending of PET with PPE, with PET as the continuous phase, could yield materials which are mutually incompatible, and the phase morphologies obtained during blending of these polymers are generally unstable. When PPE is functionalized selectively, in situ compatibilization during processing is feasible. Due to the formation of segmented copolymers, which act as compatibilizing agents, stabilization of the morphology obtained during blending is feasible. Different types of reactive PPE polymers were investigated, e.g. PPE with hydroxyalkyl, carboxylic acid, methyl ester, amino and t-BOC protected amino endgroups. These groups are positioned either in the middle of the chain or as the endgroup. All these reactive PPE polymers result in better compatibilization after mixing with PET versus unfunctionalized PPE. PPEs with carboxylic acid endgroups proved to be the most efficiently compatibilized with PET, for the PET type employed in this study. Promoters, which catalyze or take part in the coupling between PET and/or functionalized PPEs, such as triphenyl phosphite (TPP), sodium stearate, titanium (IV) isopropoxide and epoxy resins, were used in order to improve compatibilization of the PPE/PBT blends. The use of these promoters proved to give synergetic compatibilization in combination with functionalized PPEs. (C) 2001 Elsevier Science Ltd. All rights reserved.