In-situ copolymer formation and compatibilization of immiscible polymers in blends were discovered to occur during ultrasonic-assisted extrusion in the melt state under high pressures. Residence times were of the order of seconds. The mechanical performance of plastic/rubber and rubber/rubber blends subjected to ultrasonic treatment was significantly enhanced compared to those of identical blends not subjected to ultrasonic treatment and having similar phase morphologies. The appearance of a high molecular weight tail in the rubber/rubber blends, stabilization of phase morphology in the melt state, the presence of a transition interface nanolayer and a decrease in the amount of extractable components in the plastic/rubber blends after ultrasonic-assisted extrusion point towards the occurrence of in-situ copolymer formation at the interfaces.