Abstract A new class of polyisobutylene (PIB)-based thermoplastic elastomers (TPE) has been discovered, using the industrial butyl rubber polymerization system.1,2 It has been reported in the literature that living polymerization of isobutylene (IB) initiated by bifunctional or multifunctional initiators and subsequent blocking of a second monomer produces PIB-based TPE materials.3 However, in general, living IB polymerization systems are expensive, requiring unique, commercially not available initiators and expensive coinitiators. Contrary to this, we found that the polymerization of IB shows living character up to 40 % conversion under the rather inexpensive traditional butyl rubber polymerization conditions (H2O/AlCl3 in MeCl at -90 °C to -100 °C), when it is copolymerized with alloocimene, a terpene, by forming a stable emulsion. This is the first example of a two-phase living carbocationic polymerization. The synthesized diblock and triblock copolymers exhibit thermoplastic elastomeric properties. This is the first example of a diblock thermoplastic elastomer. Both the diblock and triblock copolymers show good filler interaction with carbon black. The polymerization system solves the problems related to the currently used TiCl4-based living systems: expensive initiators and coinitiator, high viscosity at low concentration and poor heat transfer. References 1. Puskas, J.E.; Kaszas, G.; Gergely, A.L. US Provisional Patent Application # 61/587,736. January, 2011. 2. Puskas, J.E.; Gergely, A.L.; Kaszas,G., J. Polym. Sci. Part A: Polym. Chem., 2013, 51(1), 29-33. 3. Puskas, J.E.; Kaszas, G., Rubber Reviews, Rubber Chem. Techn., 1996, 69(3), 462-475.