An immiscible blend of poly(hydroxy ether of bisphenol-A) (phenoxy) and poly(1,4-butylene terephthalate) (PBT) with phase separation was observed in as-blended samples. However, compatibilization of the phenoxy/PBT blends can be promoted through chemical exchange reactions of phenoxy with PBT upon annealing. In contrast to the as-blended samples, the annealed phenoxy/PBT blends had a homogeneous phase with a single T_g that could be enhanced by annealing at 260°C. Infrared (IR) spectroscopy demonstrated that phase homogenization could be promoted by annealing of the phenoxy/PBT blend, where alcoholytic exchange occurred between the dangling hydroxyl group in phenoxy and the carbonyl group in PBT in the heated blends. The alcoholysis reaction changes the aromatic linkages to aliphatic linkages in carbonyl groups, which initially led to the formation of a graft copolymer of phenoxy and PBT with an aliphatic/aliphatic carbonyl link. The progressive alcoholysis reaction resulted in the transformation of the initial homopolymers into block copolymers and finally into random copolymers, which promoted phase compatibilization in blends of phenoxy with PBT. Due to the fact that the amount of copolymers increased upon annealing, crystallization of PBT was inhibited by alcoholytic exchange in the blends.