Ternary blends, based on 70% by weight of polypropylene (PP) with 30% by weight of a dispersed phase, consisting of 15% polyamide-6 (PA6) and 15% of a mixture comprising varying ratios of an unreactive poly[styrene-b-(ethylene-co-butylene)-b-styrene] (SEBS) triblock copolymer and a reactive maleic anhydride-grafted SEBS-g-MA, were produced via melt blending in a co-rotating twin-screw extruder. TEM revealed the blend containing only non-reactive SEBS to exhibit individual PA6 and SEBS dispersed phases. However, the progressive replacement of SEBS with reactive SEBS-g-MA increased the degree of interfacial reaction between the SEBS and PA6 phases, thus reducing interfacial tension and providing a driving force for encapsulation of the PA6 by the SEBS. Consequently, the dispersed-phase morphology was observed to transform from two separate phases to acorn-type composite particles, then to individual core-shell particles and finally to agglomerates of the core-shell particles. The resultant blends exhibited significant morphology-induced variations in both thermal and mechanical properties. DSC showed that blends in which the diameter of the PA6 particles was reduced to less than or equal to 3 mum by the increasing interfacial reaction exhibited fractionated PA6 crystallisation. In general, mechanical testing showed the blends to exhibit inferior low-strain tensile properties (modulus and yield stress) compared to the matrix PP, but superior ultimate tensile properties (stress and strain at break) and impact strength. These changes are discussed with reference to composite models. (C) 2004 Published by Elsevier Ltd.