In this study, a novel reactive blending process was developed for producing poly(vinyl chloride)/thermoplastic polyurethane (PVC/TPU) blends. An alternative to melt or solution blending, the advantages to such a blending technique are fewer processing steps and less cost, no solvent removal, reduced PVC degradation, and the potential for producing otherwise unobtainable blend morphologies and properties. Using an internal mixer, PVC was compounded and plasticized With the polyol and chain extender of a polyester-based TPU. Then, upon addition of the stoichiometric amount of TPU diisocyanate, a high molecular weight TPU was polymerized in situ with PVC. Because of reaction-induced phase separation, the resulting partially miscible PVC/TPU blends were characterized by heterogeneous, multiphase morphologies. In addition, they exhibited excellent tensile properties intermediate between that of neat PVC and TPU. (c) 2005 Society of Plastics Engineers.