Abstract A compatibilization method for improving the mechanical and thermal properties of thermoplastic/thermotropic liquid crystalline polymer (LCP) blends has been tested in blends of poly(ether imide), PEI, with a thermotropic copolyester (Vectra B-950). It is based on the addition of a third component, a functionalized elastomer (hydroxy terminated silicone rubber), to the blend that interacts with the matrix polymer and the thermotropic liquid crystalline polymer, facilitates the structural development of the thermotropic liquid crystalline polymers (TLCP) phase by acting as a compatibilizer at the interface. The main properties of blends required are flexibility of material in presence of compatibilizer. The viscosity of the compatibilized in situ composite was increased by the silicone rubber owing to the strong interaction. The coefficient of thermal expansion (CTE) of PEI/TLCP blend becomes lowered when the content of silicone rubber is increased. Morphological observation showed that the addition of compatibilizer significantly reduced the size of the dispersed LCP phase and improved their dispersion within the matrix. Measurement of the tensile properties shows increased strength as well as enhanced modulus and elongation when PEI/TLCP blend is properly compatibilized. This is attributed to fine fibril generation induced by the addition of compatibilizer.