The mode of microscopic deformation during impact testing of a 80/20 PMMA rubber blend has been examined by in situ small-angle X-ray scattering using synchrotron radiation. As discussed previously, the blend studied possesses an extremely small dispersed rubber phase prepared via chemically induced phase separation and responds as ductile during tensile deformation but suffers from brittle failure under impact conditions. In part 2, it was shown that the ductile behavior is accompanied by cavitation which relieves the triaxial stress state and, subsequently, promotes shear yielding. The present study demonstrates that increasing the strain rate leads to an enhancement of the nucleation of voids combined with a decreasing tendency for void orientation upon tensile deformation. By the introduction of a notch, the deformation rate is enhanced even further, and the mode of microscopic deformation transforms to crazing, which explains the poor macroscopic impact toughness. Precavitation of the samples, however, restores the toughness, even under impact conditions.