Thermoplastic elastomer (TPE) based on high impact polystyrene (HIPS)/ethylene-vinyl acetate copolymer (EVA)/waste ground rubber tire (WGRT) powder composites were prepared by melt-compounding, and the composites were compatibilized by styrene-butadiene-styrene block copolymer (SBS). The effects of SBS compatibilizer on mechanical properties and morphological properties of the composites were investigated systemically. Experimental results indicate that SBS had a good compatibilization effect on the HIPS/EVA/WGRT composites. Compared with HIPS/EVA/WGRT composites, the tensile strength and the elongation at break went through maximum values at a compatibilizer resin content of 12 phr, which were improved by 145% and 1280%, respectively. Morphology study shows that the interface interaction was strong in the HIPS/EVA/WGRT composites compatibilized by SBS, which contributed to the significantly improved mechanical properties. Payne effect could be found in the strain sweep of HIPS/EVA/SBS/WGRT composites, which was related to the variation of interface interaction. The increasing dosage of SBS compatibilizer in the HIPS/EVA/WGRT composites weaken the Payne effect and led to the slow decrease of storage modulus.