A novel processing method of combining dynamic vulcanization with the silane-grafted water-crosslinking technique to improve the comprehensive properties of polyethylene (PE) is reported. PE was grafted with vinyl triethoxysilane (VTEO) first, and then, N,N,N',N'-tetragylcidyl-4,4'-diaminodiphenylmethane epoxy resin was dynamically cured in a PE-g-VTEO matrix through a twin-screw extruder to prepare PE-g-VTEO/epoxy blends. Polyethylene-graft-maleic anhydride (PE-g-MAH) was used as a compatibilizer to improve the interaction between PE-g-VTEO and the epoxy resin. The results show that the novel processing method improved the strength, stiffness, and toughness of the blends, especially the heat resistance of the blends, by the addition of the dynamically cured epoxy resin as the reinforcement. PE-g-MAH increased the compatibility between PE-g-VTEO and the epoxy resin, which played an important role in the improvement of the comprehensive properties of the blends. In addition, after treatments in both hot air and hot water, the comprehensive properties of blends were further improved, thanks to the further curing reaction of epoxy with PE-g-VTEO. (C) 2010 Wiley Periodicals, Inc. J Appl Polym Sci 119: 2539-2548, 2011