The cationic polymerization of 1,3,5-trioxane, 1,3-dioxolane and a small amount of 2-hydroxyacetic acid (HAA) was carried out, and the resulting modified-polyacetal (POM) was blended with thermoplastic polyurethane (TPU) in melt. The results of H-1 NMR analysis indicated that HAA was almost incorporated in the modified-POM, and that the resulting carboxyl end-group and hydroxyl end-group in the modified-POM reacted with TPU during the melt blending. There were many boundary layers between the cavities and matrix in the modified-POM/TPU (82/18 by weight) blend that was etched with tetrahydrofuran (THF), and the diameter of the cavities became similar to 0.3-1 mu m long when the blending time reached 10 min. The results of scanning electron microscopic (SEM) observation and dynamic mechanical analysis (DMA) indicated that the modified-POM/TPU blend had a good compatibility because of the interfacial reaction between the modified-POM and TPU phase in the blend. The modified-POM/TPU blend exhibited higher Charpy impact strength when compared with a normal-POM/TPU blend; the toughness of the modified-POM/TPU blend attributed to the good compatibility between the two phases. (c) 2006 Wiley Periodicals, Inc.