In this work, five ternary blends based on 70% by weight (wt %) of polypropylene (PP) with 30% wt of polycarbonate (PC)/poly(styrene-b-(ethylene-co-butylene)-b-styrene)(SEBS) dispersed phase consists of 15 wt % PC and 15 wt % reactive (maleic anhydride grafted) and nonreactive SEBS mixtures at various ratios were prepared in a co-rotating twin screw extruder. scanning electron microscopy (SEM) micrographs showed that the blends containing only nonreactive SEBS exhibited a fine dispersion of core-shell particles. With decreasing the SEBS/SEBS-g-Maleic Anhydride (MAH) weight ratio, the morphology changed from the core-shell particles to a mixed of core-shell, rod-like and individual particles. This variation in phase morphology affected the thermal and mechanical properties of the blends. DSC results showed that the blends containing only nonreactive SEBS exhibited a minimum in degree of crystallinity due to the homogeneous nucleation of core-shell particles. Mechanical testing showed that in the SEBS/SEBS-g-MAH weight ratio of 50/50, the modulus and impact strength increased compared with the PP matrix while the yield stress had minimum difference with that of PP matrix. These effects could be attributed to the formation of those especial microstructures revealed by the SEM studies. (C) 2011 Wiley Periodicals, Inc. J Appl Polym Sci 121: 2680-2687, 2011