For polymer/liquid crystal polymer (LCP) blend systems, the in-situ fibrillation of LCP in polymer matrix can result in the self-reinforcement of polymer/LCP composites. How to control the microfibrillation of LCP in matrix is a key to enhance the mechanical properties of composites. In this paper, we investigated the transesterification-controlled compatibility and microfibrillation of phosphorus-containing thermotropic liquid crystalline polyester, poly(p-hydroxybenzoate-co-DOPO-hydroquinone ethylene terephthalate) (PHBDET) in the PC/acrylonitrile-butadiene-styrene copolymer blend (PC-ABS) during the melt processing. A standard mode and temperature-modulated differential scanning calorimetry (DSC and TMDSC) and C-13 nuclear magnetic resonance (C-13 NMR) were used to investigate the transesterification and compatibility of PHBDET with PC-ABS. Microstructures, theological and mechanical properties of the composites were also studied via scanning electron microscopy (SEM), dynamic theological measurement and universal material testing machine. The results showed that the extent of transesterification could influence the compatibility of PHBDET with PC-ABS, and could be controlled by processing temperature and time. The improved compatibility was not always favorable for the microfibrillation of PHBDET in PC-ABS, but a certain extent of transesterification showed a positive influence on the tensile properties of the composites. Therefore, there existed an optimal extent of transesterification, in which the composite could show a good balance of compatibility and tensile properties. (C) 2009 Elsevier Ltd. All rights reserved.