The conjugated effects of both reactive compatibilization and dynamic vulcanization on the phase inversion behavior of poly(butylene terephthalate) (PBT)/epoxide-containing rubber blends have been studied in detail. Pure ethylene-methyl acrylate random copolymer (E-MA) and ethylene-methyl acrylate-glycidyl methacrylate random terpolymer (E-MA-GMA) were used as non reactive or reactive rubber phase, respectively. Location of the phase inversion region was studied using several techniques, including transmission electron microscopy (TEM) and dynamical mechanical thermal analysis (DMTA). To evaluate the relative influence of the blend compatibilization and the dynamic vulcanization on the phase inversion behavior, the relative kinetics of the two reactions were modified using different PBT and E-MA-GMA grades. The obtained results show unambiguously that the position and the width of the phase inversion region is essentially governed by the kinetic of the dynamic vulcanization process. The effect of the blend compatibilization remains quite limited even in the case of fast interfacial reaction. The crosslinking of the rubber phase induces an important shift of the phase inversion composition to higher rubber content. For blends containing low molecular weight PBT, up to 60 wt% of rubber can be homogeneously dispersed in the PBT matrix at long mixing time. In this case, development of high performance PBT based thermoplastic vulcanisates can be envisioned. (C) 2004 Elsevier Ltd. All rights reserved.