An in-situ microfiber-reinforced composite (MRC) based on polyethylene terephthalate) (PET) and polyethylene (PE) was prepared by slit die extrusion followed by hot stretching. Test specimens were prepared by injection molding at the processing temperature of the PE matrix. At this temperature, far below the melting temperature of PET, the PET phase is solid and able to keep its shape during processing. The morphological characteristics of the dispersed PET phase in the blend, at a fixed weight composition (15:85) of PET and HDPE, were dependent upon the hot stretching ratio. When the hot stretching ratio was increased from I (no stretching) to 47.62, the PET particles changed from spheres and ellipsoids to rodlike particles and finally to microfibers. The maximum and average diameters of the PET particles decreased steadily, while the minimum fiber diameter remained constant. The tensile modulus and strength of PET/PE blends were significantly enhanced with increasing hot stretching ratio, indicating that the microfibers have good reinforcement. Ultimate elongation decreased with increasing hot stretching ratio and there was a critical hot stretching ratio above which a ductile-brittle transition occurred.