The effect of annealing on the morphology and subsequent crystallization kinetics of poly (ethylene terephthalate)/polycarbon ate blends have been investigated using differential scanning calorimetry (DSC), polarized light microscopy, and scanning electron microscopy (SEM). During annealing transesterification and phase coarsening occurred, and the final properties were compromizes between these two competing effects. Initially, the effect of phase separation dominated and the rate of cold crystallization of PET increased. Transesterification, however, became increasingly important and the rate of crystallization decreased progressively until finally the blend completely lost the ability to crystallize. At this stage in the reaction a single glass transition was observed and uniform glassy material observed in the SEM. The maximum crystallinity of the blend achieved on heating showed the same trend in first increasing and then decreasing with annealing time. (C) 2004 Wiley Periodicals, Inc.