Blending of two or more immiscible polymers is an attractive route to generate new materials. However, during processing in the liquid state, the flow-induced microstructure changes continuously due to a complex interplay between break-up and coalescence, typically resulting in a coarse morphology with poor properties. Hence, the need to generate and stabilize a fine morphology is obvious and block copolymers are typically used as compatibilizers. The use of nanoparticles has been suggested to be an alternative to 'compatibilize' immiscible polymer pairs. In the present work, the role of interfacially located nanoparticles on the coalescence in immiscible blends is investigated systematically to clarify their role as compared to that of block copolymers. A (70/30 vol%) polydimethylsiloxane (PDMS)/polyisobutylene (PIB) blend with a droplet/matrix microstructure is chosen as a model system. Contact angle measurements and theoretical models are used to select the surface chemistry of the nanoparticles to ensure their localization at the polymer/polymer interface, which is experimentally verified by scanning microscopy under cryogenic conditions. Using a rheological method it is shown that coalescence of the dispersed phase is slowed down or even totally suppressed when nanoparticles are present at the interface. This effect becomes stronger when the particle concentration is increased or the (aggregate) size is reduced. Additionally, anisotropic nanoparticles tend to stabilize blends more efficiently than their spherical counterparts. A combination of optical microscopy and interfacial rheometry using planar interfaces has been used to demonstrate that the nanoparticles mainly affect the surface rheological properties, whereas traditional compatibilizers also strongly affect the interfacial tension. As a result, nanoparticles with a suitable surface chemistry can be used to tune the flow-induced microstructure of immiscible polymer blends by optimizing their concentration, size and shape.