AbstractCompatibilized and dynamically vulcanized thermoplastic elastomer blends of poly(butylene terephthalate) (PBT) and ethylene propylene diene terpolymer (EPDM) can be prepared by using an EPDM rubber that contains reactive epoxy groups. During melt mixing the epoxy groups react with PBT endgroups to form graft copolymer. The compatibilized blends can be dynamically vulcanized by conventional vulcanization agents for EPDM such as peroxides or by vulcanization agents that react with residual epoxy groups on the EPDM such as diamines. This paper describes the effects of compatibilization and dynamic vulcanization on microstructure and mechanical properties.