The main aim of this work was two fold, firstly to investigate the effect of a highly reactive comonomer, divinylbenzene (DVB), on the extent of melt grafting of glycidyl methacrylate (GMA) on ethylene-propylene rubber (EPR) using 2,5-dimethyl-2,5-bis-(tert-butyl peroxy) hexane (Trigonox 101, T101) as a free radical initiator, and to compare the results with a conventional grafting of the same monomer on EPR. The effect of processing conditions and chemical composition including the concentration of peroxide, GMA and DVB on the extent of grafting was investigated. The presence of the comonomer (DVB) in the grafting process resulted in a significant increase in the extent of the grafting using only a small concentration of peroxide. The extent of grafting increased drastically with increasing the DVB concentration. Interestingly, in the comonomer system, the extent of the undesired side reaction, normally the homopolymerisation of GMA (polyGMA) was shown to have reduced tremendously and in most cases the level of polyGMA was immeasurable in the samples. Compared to a conventional EPR-g-GMACONV (in the absence of a comonomer), the presence of the comonomer DVB in the grafting system was shown to result in more branching and crosslinking and this was paralleled by an increase in DVB concentration. In contrast, the extent of grafting in conventional system increased with increasing the peroxide concentration but the level of grafting was much lower than in the case of DVB. Homopolymerisation of GMA and excessive crosslinking of EPR became dominant at high peroxide concentration and this reflects that the side reactions were favourable in the conventional grafting system. The second aim was to examine the effect of the in-situ functionalised EPR when used as a compatibiliser for binary blends. Blending PET with functionalised EPR (f-EPR) gave a significant improvement in terms of blend morphology as well as mechanical properties. Blending PET with f-EPRDVB (prepared with DVB) was much more effective compared to the corresponding PET/f-EPRCONV (without DVB) blends in which f-EPRDVB having optimum grafting level of 2.1 wt% gave the most pronounced effect on the morphology and mechanical properties. The presence of high polyGMA concentration in f-EPRCONV was found to create damaging effects on its morphology. However, the use of commercial terpolymers based on ethylene-methacrylate-glycidyl methacrylate (EM-GMA) or a copolymer of ethylene-glycidyl methacrylate (E-GMA) containing various GMA levels as compatibilisers in PET/EPR blends was more efficient compared to PET/EPR/f-EPR blends with the former blends showing finer morphology and high elongation at break.