An attempt has been made to study the microstructural deformation and micro damage evolution process in the thermoplastic polypropylene (PP) blended with the ethylene-propylene rubber (EPR) and talc. The in situ observation is conducted during uniaxially stretching within TEM step by step to investigate the deformation events depending on the elongation of samples. In addition, the microstructural deformation and damage evolution process were simulated by coarse-grained molecular dynamics (MD). The experimental result shows that the micro damage initiates at the interface between PP matrix and talc particle. Then, the micro void is generated there, leading to the fibrils of the PP matrix and EPR particles. The similar trend of the micro damage evolution process is obtained by MD simulation. Finally, the effects of the interfacial strength of PP-EPR and PP-talc on the microstructural damage evolution and macroscopic mechanical properties are investigated. It is indicated that increasing the interfacial strength between PP-EPR is more effective for improving the stiffness and the maximum stress, compared to the PP-talc interfacial strength. In addition, to enhance the material ductility, it is important to increase the interfacial strength of PP-EPR.