This paper presents the synthesis of core-shell polybutadiene-graftpolystyrene (PB-g-PS) with a core-shell ratio of 70/30 in the copolymer. The polyphenylene oxide (PPO)/polystyrene (PS) alloy is toughened by high-impact polystyrene (HIPS) and the PB-g-PS copolymer. The effect of entanglement density on the mechanical properties and the deformation mechanism of the blends is investigated. The entanglement density of the blends is found to increase with increasing PPO content. The mechanical properties of the blends indicated that HIPS and PB-g-PS have excellent synergic toughening effects on the PPO/PS alloy, and the impact strength and elongation at break gradually increased with increasing matrix chain entanglement density. When the chain entanglement density of the matrix is low, the deformation mechanism of the blends is multiple crazing. As the chain entanglement density of the matrix increased, there are two deformation mechanisms in the blends at the same time: crazing and shear yield. However, the crazing disappeared when the chain entanglement density of the matrix reached a certain value, and only shear yield existed. Therefore, with the increase of matrix entanglement density in the blends, the deformation mechanism of the blends gradually transitioned from crazing to shear yield and cavitation, enhancing the toughness of the blends.