The reactive compatibilization effect of a small molecule, bismaleimide (BMI), on poly(butylene terephthalate) (PBT)/low-density polyethylene (LDPE) and PBT/ethylene propylene diene (EPDM) rubber blends were investigated. All the blends were prepared by melt blending in the mixing chamber of a Haake Rheocord. The particle size of dispersed phase was reduced by Ͼten times by adding 1.2 wt % of BMI as observed with scanning electron microscopy. The torque-time curve recorded during mixing showed that the addition of BMI leads to a significant increase in the viscosity of PBT, LDPE, EPDM, and the blends. This indicates that a chemical reaction has taken place. It was confirmed that free radicals are involved in the reactions because the addition of a stabilizer to the blends has removed all the compatibilizing effect, and the torque-time curve does not show any increase in viscosity. A possible mechanism of compatibilization is proposed. The shear forces during melt mixing cause the rupture of chemical bond in the polymers, which form macroradicals of PBT, LDPE, or EPDM. These macroradicals react with BMI to form PBT-BMI-LDPE or PBT-BMI-EPDM copolymers. These in situ-formed copolymers act as compatibilizers to give a significant refinement of the blend morphology.