Poly(ethylene terephthalate) (PET) was blended with up to 5% of an SEBS elastomer. The elastomer was functionalized with 0 to 4.5wt% maleic anhydride grafted onto the ethylene-butylene midblock. Graft copolymer formed by reaction of PET hydroxyl end groups with the anhydride in situ was thought to act as an emulsifier to decrease interfacial tension and promote adhesion. All the elastomers increased the melt viscosity of PET, however the amount and functionality of the elastomer did not have a large effect on blend theology. In contrast, particle size was strongly dependent on the elastomer functionality : the higher the functionality, the smaller the particle size and the narrower the particle sine distribution. Furthermore, elastomer content had less effect on the particle size as the functionality increased, and the tendency toward increasing particle size with increasing elastomer content diminished. These trends were attributed to an increase in the degree of grafting on the in situ graft copolymer. Particles of functionalized SEBS were primarily spherical in injection moulded blends in contrast to the highly elongated particles of unfunctionalized SEBS. In un-notched tensile tests, blending PET with any SEBS elastomer enhanced the stability of the propagating neck. Notched tensile tests differentiated among the blends in terms of their toughness. The least effective elastomer was the unfunctionalized SEBS. The most effective was the SEBS with only 1% anhydride. The decrease in toughness with increasing functionality was attributed to decreasing particle size.