Blends of a poly(2,6-dimethyl-1,4-phenylene oxide) (PPO)/polyamide 6 (PA 6) alloy toughened with a novel polyolefin elastomer poly(ethylene-1-octene) (POE) were prepared via melt extrusion. In order to improve the compatibilization between POE and the PPO/PA 6 alloy, POE was grafted with maleic anhydride (MA), which could react with the amine group of PA 6. The Izod impact strength of the blends exhibited an optimum when the extent of MA grafting of POE was changed, which is an order of magnitude higher than that of the untoughened blends. The morphology revealed that the size of the POE particles decreased with an increasing MA grafting ratio of POE. Studies on the tensile properties and rheology of the blends were also carried out. (C) 2003 Wiley Periodicals, Inc.