The formation of dispersed phase in blends of incompatible polymers during melt extrusion with a co-rotating twin screw extruder was studied, using nylon and polyester as the matrix and ethylene-propylene rubbers as the dispersed phase. A master curve is obtained, i.e., Gηmα/γ = 4p±0.84, where G is the shear rate, γ the particle diameter, η the interfacial tension, ηm the matrix viscosity, ηd the dispersed-drop viscosity, and p = ηd/ηm. The plus (+) sign applies for p > 1, and the minus (−) sign for p < 1. Thus, the dispersed-drop size is directly proportional to the interfacial tension and the ±0.84 power of viscosity ratio. The dispersed drops are the smaller, when the interfacial tension is the lower and the viscosity ratio is the closer to unity. The interfacial tension is largely controlled by the polarities of the two phases, and can be varied over several orders of magnitude by using appropriate dispersants.