Blending is an effective way to improve properties of rubbers and develop new materials, so more than 75 % of the rubber consumption in the world is rubber blend. However, blending of thermoplastic elastomers has not yet been emphasized, and few successful examples have been reported. The main challenge for blend systems is compatibility of two components. Herein, a series of (polydimethylsiloxane-based PU)-g-(poly (propylene glycol)-based PU) ((PDMS-PU)-g-(PPG-PU)) graft copolymers with different graft chain lengths and hard segment contents (HSC) were synthesized and utilized as compatibilizers of PDMS-PU/PPG-PU blends. The influence of the structure of compatibilizers on the morphology of blends was investigated, and the compatibilization mechanism was proposed. With the solubilization, the phase structure of blends transforms from “droplet-in-matrix” morphologies to co-continuous ones, and the average size of PPG-PU dispersed phase decreases from 3.5 ± 0.45 μm to 230 ± 60 nm. This is the first time that thermoplastic PDMS-PU/PPG-PU blends with co-continuous structures have been successfully prepared. The properties of blends exhibit synergistic effects. For example, they show high tensile strength of PPG-PU in mechanical properties and unique properties of PDMS in dynamic mechanical properties, weather resistance, water resistance and biocompatibility. In addition, strain sensors were fabricated by introducing carbon nanotubes (CNTs) into the blends, which demonstrated remarkable sensing capability for diverse human body motions.