Cellulose fibers surface-coated with butyl benzyl phthalate (BBP)-plasticized PVC were evaluated as a reinforcement in thermoplastic matrices. Coated fibers were agglomerated during compounding with polypropylene (PP) and polyethylene (PE). However, an excellent dispersion and improved processability were achieved in polystyrene (PS). Melt rheology was also seen to be affected by fiber coating, and viscosity was lower for coated fibers. Fiber coatings seem to lubricate the blending process as well as to protect fiber from damage during processing. Fiber length was unaffected during treatment when coated fibers were used, as shown by microscopic investigation of extracted fibers, whereas the length of untreated fibers was reduced during processing. Introducing surface-coated fibers into PS resulted in an increased elongation at break and improved impact strength of composites. The pullout of the fibers is suggested to be responsible for both improvements. The interphase achieved in PS with PVC/BBP-coated fibers was simulated with PS/PVC/BBP blends. From DSC and DMTA, it was shown that BBP is a cosolvent for PS and PVC and that a single-phase material was achieved at the relevant concentrations, which also was confirmed by optical clarity. © 1993 John Wiley & Sons, Inc.