The formation of nanoparticles and the mechanism of their formation in a blend of a thermotropic liquid crystalline polyester (LCP) and the zinc salt of a lightly sulfonated polystyrene ionomer (Zn-SPS) were investigated using Fourier transform infrared (FTIR), thermogravimetric analysis (TGA), and gas chromatography–mass spectroscopy (GC–MS). Transmission electron microscopy (TEM) and wide-angle X-ray diffraction (WAXD) were used to study the morphology of the blends and structure of nanoparticles. The origin of nanoparticle formation appeared to be related to the development of phenyl acetate chain ends on the LCP that arose due to a chemical reaction between the LCP and residual catalytic amounts of zinc acetate and/or acetic acid that were present from the neutralization step in the preparation of the ionomer. Two-dimensional X-ray diffraction patterns for the blends revealed that chain-packing within nanoparticles was different than that of the LCP or the homopolymers prepared from the LCP co-monomers. The crystals formed in the nanoparticles were also stable to much higher temperature (>350 °C) than the parent LCP crystallites that melted at ∼280 °C.