Two types of core-shell structured latexes, poly(methyl methacrylate-co-butadiene-co-styrene) (MBS) and poly(methyl methacrylate-co-methylphenyl siloxane-co-styrene) (MSiS) were used to modify recycled polycarbonate (PC) for the enhancement of toughness and flame retardancy. The impact strength of the modified PC blends was not improved after melt-blending recycled PC with these two kinds of latexes, probably because the latex particles were not evenly dispersed in the PC matrix because of the incompatibility between PC and PMMA shell of the latexes. Addition of a compatibilizer, e.g. diglycidyl ether of bisphenol-A or poly(styrene-co-maleic anhydrude), can effectively enhance the toughening effect of recycled PC with core-shell structured modifiers. The presence of compatibilizer in the blends reduces the interfacial tension and introduces a steric hindrance to coalescence, and thus enhances the interfacial adhesion between PC domain and PMMA shell, and improves the dispersion of core-shell structured particles in the PC matrix. The ternary blends achieve a high impact resistance by cavitation of the particles, which relieves the triaxial stress and promotes massive shear yielding of the matrix, and then enables the matrix to fracture by the plane stress ductile tearing mode. Additionally, MSiS has a silicone-based core and can effectively retard the combustion of recycled PC. The blends containing 7 wt % MSiS and 3 wt % compatibilizer can achieve a UL94 V-0 rating in vertical burning test. We proposed that, during combustion, a fine dispersion of MSiS particles in the PC matrix facilitates the rapid migration of MSiS and formation of a uniform and highly flame resistant char barrier on the surface of the modified PC. (C) 2010 Wiley Periodicals, Inc. J Appl Polym Sci 116: 2451-2464, 2010