In this study, the potential of recycled polyethylene terepthalate (rPET) as a well-defined reinforcing material for the in situ microfibrillar reinforced composite was investigated in comparison with that of liquid crystalline polymer (LCP). Each dispersed phase (LCP or rPET) was melt blended with polypropylene (PP) by using an extrusion process. The rheological behavior, morphology, and thermal stability of LCP/PP and rPET/PP blends containing various dispersed phase contents were investigated. All blends and LCP exhibited shear thinning behavior, whereas Newtonian fluid behavior was observed for rPET. The incorporation of LCP or rPET into PP significantly improved the processability. Especially for the blends with 20 and 30 wt% rPET, the potential of rPET as a processing lubricant by bringing down the melt viscosity of the blend system was as good as LCP. The elongated LCP domains were clearly observed in as-extruded strand. Although the viscosity ratio of the rPET/PP system was lower than that of the LCP/PP system, most rPET domains appeared as small droplets. An addition of LCP and rPET into PP matrix improved the thermal resistance significantly in air but not in nitrogen. The obtained results suggested the high potential of rPET as a processing aid and thermally stable reinforcing material similar to LCP.