Polyethylene terephthalate (PET)/Polypropylene (PP)/TiO2 nanocomposites were prepared by compounding a PP/TiO2 nanocomposite premix with PET in absence and presence (up to 6 vol %) of maleic anhydride grafted polypropylene (PP-g-MA). In absence of PP-g-MA, the TiO2 nanoparticles were mainly located at the PET/PP interface and to a lesser extent in the dispersed PET droplets. As the TiO2 nanoparticles were coated by polyalcohol their surface could react with PP-g-MA and thus improving the compatibilization with PP. Therefore in presence of PP-g-MA the TiO2 nanoparticles were preferentially located in the PP. The incorporated TiO2 nanoparticles exerted a compatibilization effect on the PET/PP blend. Depending on the location of TiO2 three different compatibilization mechanisms were proposed to be at work: (1) Locating at the interface, the TiO2 nanoparticles decrease the free energy of mixing, and thus increase the thermodynamic stability of the nanocomposites; (2) The TiO2 nanoparticles at the interface also prevent the coalescence of PET droplets; (3) Preferentially located in the PP matrix, the TiO2 nanoparticles decreased the viscosity ratio which facilitated the droplet breakup of PET. (C) 2009 Wiley Periodicals, Inc. J Polym Sci Part B: Polym Phys 47: 1616-1624, 2009