Reaction-induced phase separation (RIPS) of miscible blends of poly(-caprolactone) (PCL) and an epoxy resin based on poly(propylene oxide) (PPO) was used to prepare thermoplastic vulcanizates (TPVs) with fine rubber dispersions. Scanning electron microscopy (SEM) confirmed the formation of cross-linked rubber particles dispersed in the thermoplastic matrix at PCL contents =20 wt%. The morphology development during phase separation was studied by optical microscopy (OM) and time-resolved small-angle light scattering (SALS). It was shown that higher curing temperatures lead to a decrease in rubber particle size, but at the same time lead to an increase in the extent of particle connectivity. In some cases, gelation of the PPO-rich phase limits full structure development, which leads to extensive connectivity between the dispersed rubber particles and a strong deterioration in tensile properties.