Hybrid composites of in-situ microfibrillar recycled polyethylene terephthalate (rPET)/glass fiber (GF)/polypropylene (PP) were developed as an economical and environmentally friendly alternative to glass fiber reinforced thermoplastic PP composites. The effect of replacing glass fibers with in-situ formed polymer microfibrils on mechanical and viscoelastic properties of the composites was investigated with tensile, flexural, and dynamic mechanical tests. Characterization results showed that mechanical and viscoelastic performance of 34% glass fiber reinforced PP can be obtained with 24% glass fiber, 10% microfibrillar rPET composites. Compatibilization effect of the maleic anhydride grafted PP (MA-g-PP) was studied using Fourier transform infrared (FTIR) spectroscopy. The scanning electron microscopy (SEM) images confirmed the formation of the rPET microfibrils in the hybrid matrix. Besides, composites with MA-g-PP compatibilizers showed significantly improved fiber-matrix interfacial adhesion on the SEM images.