The major morphological changes during polymer blending occur during the initial softening stage. This work explains the evolution of phase morphology of polymer blends from pellets to submicron particles in a co‐rotating twin‐screw extruder. The extruder was opened and blend samples were taken along its length. The major phase component was extracted by means of a selective solvent so that the dispersed phase morphology could be viewed directly by using scanning electron microscopy. The two systems studied were 80:20 polystyrene/amorphous polyamide and 80:20 polystyrene/polypropylene. In both systems, the initial morphology consisted of sheets of dispersed phase. Holes form in the sheets, and these holes grow as a result of interfacial tension forces until they coalesce with each other, forming thin ligaments. These fluid ligaments are unstable and break up via mixer shear forces. Very large changes in dispersed phase size are observed during the softening stage. The particle size changes less after the polymers are completely melted. The extruder results are compared to results from a batch mixer. The same dispersed phase sheeting mechanism is seen in the initial morphology in the batch mixer and the breakup of the dispersed phase domains parallels the breakup seen in the extruder.