Side-chain liquid crystalline ionomer (SLCI) containing sulfonic acid groups with a polymethylhydrosiloxane main-chain was used in the blends of polypropylene (PP) and polybutylene terephthalate (PBT) as a compatibilizer. The crystalline behavior, morphological, and mechanical properties of the blends were investigated in detail by differential scanning calorimetry (DSC), polarizing optical microscope (POM), Fourier transforms infrared spectroscopy (FTIR), and scanning electron microscopy (SEM). Revealed by the shift of T in DSC thermogram and the shift of the absorbed peak in FTIR spectra, specific interaction led to stronger interfacial adhesion between these phases, which resulted in much finer dispersion of the minor PBT phase in PP matrix. The SLCI containing sulfonate acid groups acted as physical cross-linking agent along the interface, which compatibilized PP/PBT blends. The mechanical property of the blends including 4 wt % SLCI contents was better than that of other SLCI contents in the blends. (C) 2009 Wiley Periodicals, Inc. J Appl Polym Sci 112: 3007-3015, 2009