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Tensile behavior and impact strength of poly(butylene terephthlate) (PBT)/styrene-ethylene-butylene-styrene (SEBS) copolymer blends were studied at SEBS volume fraction 0–0.38. Tensile modulus and strength decreased, whereas breaking elongation increased with SEBS content. Predictive models are used to evaluate the tensile properties. Strength properties were dependent on the crystallinity of PBT and phase adhesion. The normalized notched Izod impact strength increased with the SEBS content; at Φd = 0.38, the impact strength enhanced to five times that of PBT. Scanning electron microscopy was used to examine phase morphology. Concentration and interparticle distance of the dispersed phase influenced impact toughening. In the presence of maleic anhydride-grafted SEBS (SEBS-g-MAH), the tensile modulus and strength decreased significantly, while normalized relative notched Izod impact strength enhanced to 7.5 times because of enhanced interphase adhesion. POLYM. ENG. SCI., 53:2242–2253, 2013. © 2013 Society of Plastics Engineers