Blends of polyethylene terephthalate (PET) and ethylene-ethyl acrylate-maleic anhydride terpolymer (E-EA-MAH) were dynamically crosslinked in a one-step extrusion process. An amine-terminated glycol reacting with MAH moieties was used as the crosslinking agent. The effect of blend composition and dynamic crosslinking on the microstructure and mechanical properties were investigated. Blend ratios ranging from 80:20 to 20:80 PET/E-EA-MAH were studied. The region of phase inversion was located for uncrosslinked and dynamically crosslinked blends. The rheological characterization was also carried out for these blends in comparison with the neat materials. After dynamic crosslinking, the phase inversion is shifted from the 30-40% range to the 70-80% range of elastomer content. This shift is induced by the increase of viscosity and elasticity of the network formed. Dynamically crosslinked blends show significant improvements in impact strength but also exhibit a decrease in elongation at break.