Rheology and phase separation were investigated for aqueous mixtures of two oppositely charged hydrophobically modified polyelectrolytes. The typical phase separation, normally seen for oppositely charged polymer mixtures, is dramatically reduced by the presence of hydrophobic modification, and phase separation is only detected close to the point of charge neutralization. While the two polyelectrolytes separately can give high viscosities and a gel-like behavior, a pronounced maximum in viscosity and storage modulus with the mixing ratio of the polyelectrolytes is observed; the maximum is located between the points of charge and hydrophobe stoichiometry and reflects a combination of hydrophobic and electrostatic association. Lowering the charge density of the anionic polymer leads to a strengthened association at first, but at lower charge densities there is a weakened association due to the onset of phase separation. The strength of the electrostatic interaction was modified by adding salt. Increased ionic strength can lead to phase separation and to increased or decreased viscosity depending on the polyelectrolyte mixing ratio.