Blends prepared by melt-mixing of thermoplastic material-elastomer have gained considerable attention in recent years. Heat-shrinkability of polymer, which is dependent on elastic memory, can be introduced into the system in the form of an elastomeric phase. The present study deals with the measurement of the heat-shrinkability of the blend of grafted polyethylene and polyurethane elastomer. Interchain crosslinking between grafted polyethylene and elastomer improves shrinkability. High-temperature performance of the sample depends on the degree of interchain crosslinking. Probable interactions between the rubber and plastic phase are confirmed by IR spectroscopy. Extraction of the elastomeric phase is restricted due to interchain crosslinking as confirmed by SEM study. © 2000 Society of Chemical Industry