Symmetric polystyrene (PS)–poly(dimethylsiloxane) (PDMS) diblock copolymers were mixed into a 20% dispersion of PDMS in PS. The effect of adding the block copolymer on the blend morphology was examined as a function of the block copolymer molecular weight (Mn,bcp), concentration, and viscosity ratio (ηr). When blended together with the PS and PDMS homopolymers, most of the block copolymer appeared as micelles in the PS matrix. Even when the copolymer was preblended into the PDMS dispersed phase, block copolymer micelles in the PS matrix phase were observed with transmission electron microscopy after mixing. Adding 16 kg/mol PS–PDMS block copolymer dramatically reduced the PDMS particle size, but the morphology, as examined by scanning electron microscopy, was unstable upon thermal annealing. Adding 156 kg/mol block copolymer yielded particle sizes similar to those of blends with 40 or 83 kg/mol block copolymers, but only blends with 83 kg/mol block copolymer were stable after annealing. For a given value of Mn,bcp, a minimum PDMS particle size was observed when ηr ∼ 1. When ηr = 2.6, thermally stable, submicrometer particles as small as 0.6 μm were observed after the addition of only 3% PS–PDMS diblock (number-average molecular weight = 83 kg/mol) to the blend. As little as 1% 83 kg/mol block copolymer was sufficient to stabilize a 20% dispersion of 1.1-μm PDMS particles in PS. Droplet size reduction was attributed to the prevention of coalescence caused by small amounts of block copolymer at the interface. The conditions under which block copolymer interfacial adsorption and interpenetration were facilitated were explained with Leibler's brush theory. © 2002 John Wiley & Sons, Inc. J Polym Sci Part B: Polym Phys 40: 346–357, 2002; DOI 10.1002/polb.10098