Polyvinyl chloride (PVC) has been blended with masticated natural rubber (NR5) in the presence of a compatibiliser. A block copolymer of NR and polyurethane (PU) based on propylene glycol (PG) and toluene diisocyanate (TDI) was used as the compatibiliser. Compatibilising effect of this block copolymer on PVC/NR5 (90/10) blend system was investigated by solution viscometry and optical microscopy. Testing and analysis of the blends showed that the mechanical and morphological properties are functions of compatibiliser concentration. Incorporation of 10 parts of NR5 into PVC caused deterioration of tensile properties of the latter, which were recovered on the addition of 1.5 weight per cent of the compatibiliser. Besides, the tensile impact strength of PVC gets improved greatly. This was attributed to the enhanced interfacial adhesion between PVC and NR caused by the compatibiliser. The modification at the interface leads to finer and uniform distribution of NR domains in the PVC matrix.