A morphological study of poly(butylene terephthalate) (PBT)/polyethylene (PE)/ethylene vinyl acetate (EVA) ternary blends is presented. Scanning electron microscopy analysis illustrates that, after the addition of a transesterification precursor (Bu2SnO), the blend forms a composite droplet morphology where the PBT/EVA copolymer, synthesized in situ creates a boundary layer between the incompatible PET matrix and PE dispersed phase. Electron microprobe analysis is used to localize Bu2SnO in the PET and EVA phases, where it would be expected to favour the formation of the copolymer at the interface.