Blends of poly(ethylene terephthalate) (PET)/polycarbonate (PC) in the presence of lanthanum acetyl acetonate catalyst that causes reactive mixing of two polymers were prepared, and mechanical and morphological properties were studied. For comparison reasons, simple blends of those two polymers (in the absence of catalyst) were also prepared. Compatibility strongly depends on the degree of transesterification at the interface of PET/PC, which leads to decrease of PET crystallinity, and results reveal that at 40-50% of PC content in blends a fine microstructure is formed and impact strength reaches its maximum value. This phenomenon is attributed to the occurrence of transesterification reactions. (c) 2007 Wiley Periodicals, Inc.