Design from Recycling is a novel methodology in which industrially available recycled materials are matched to potential new products. If needs be, the recycled polymer is upgraded to be made fit-for-use for the new product application. This methodology was applied to a PET-contaminated recycled PP, destined for a high-impact, medium-stiffness application. Phase segregation in the blend was found to severely inhibit the impact properties of the material. Different impact modifiers were tested in a research environment, after which an industial trial was conducted with the best result, an addition of 10 wt% SEBS. The industrial trial consisted of compounding of a large batch, followed by extrusion and thermoforming of sheets. Contrary to expectations, these products failed consequent testing. A failure analysis of the product morphology led to the intermediary hypothesis that interparticle distance between the rubber particles was still too large for complete toughening and that the interfacial tension with the immiscible PET was insufficiently mitigated by the potential interaction with the SEBS. In a second research trial, the total compounded rubber amount was increased to 15 wt% and a compatibilizing agent (CA) was added to compatibilize the PET and improve the microstructural dispersion of the rubber phase. Spectacular results were achieved for the formulation including the CA. Based on these results, this formulation was the used for the second industrial trial.