Highly compatible thermoplastic/elastomer blends were used to prepare thermoplastic vulcanizates (TPVs) with refined morphologies and improved mechanical properties. Copolymers of atactic poly(propylene) (aPP) and 5-ethylidene-2-norbornene (ENB) (aPP-co-ENB)were prepared via metallocene catalysis. Blends of isotactic poly(propylene) (iPP) and the aPPco-ENB rubbers are immiscible in the melt, but the very high compatibility leads to a refinement of the morphology in comparison to blends based on iPP and ethylene-propylenediene (EPDM) rubber. The aPP-co-ENB-based blends show improved tensile properties, while the relatively high Tg of the rubber phase retards the elastic recovery at room temperature. Dilution of the TPVs with oil broadens the temperature window for applications by a signification reduction of the Tg and improves the elasticity of the TPVs. This study demonstrates that the lower limit of the rubber particle size of TPVs that is attainable via dynamic vulcanization of immiscible blends is in the order of 300–500 nm.