The deformation and breakup of a single polymer drop with compatibilizer (premade or in-situ) inside a polymer matrix was visualized at high temperature under simple shear in a specially designed transparent Couette mixer. The compatibilized systems were polyethylene/polystyrene (PE/ PS) with polyethylene-block-polystyrene copolymer (P(E-b-S)) and polystyrene oxazoline (PSOX) with polyethylene maleic anhydride (PEMA). The uncompatibilized polymer systems studied were PE/PS and PE/PSOX. With or without compatibilizer, the drop elongated in the vorticity direction and then broke up in that direction. In the presence of premade or reactively formed compatibilizer, drop breakup occurs at a shear rate similar to that in the uncompatibilized systems, which suggests that copolymer does not affect initial polymer drop breakup greatly. Interfacial cross-linking in reactive systems stabilized the drop by forming a tiny cylindrical tip in the vorticity direction. Consequently, drop erosion and vorticity elongation and breakup occurred at a much higher shear rate compared to the nonreactive systems.