The mode of microscopic deformation in rubber-modified amorphous polymers has been investigated by small-angle X-ray scattering during tensile deformation. Synchrotron experiments were performed for blends consisting of poly(methyl methacrylate) (PMMA) with a finely dispersed rubbery epoxy phase. These blends were prepared via chemically induced phase separation, as shown in the first paper of this series. On macroscopic deformation these blends show that the toughness of brittle amorphous polymers can be significantly enhanced by the introduction of submicron size rubber particles. The objective of the present study is to establish the relationship between the morphology and the macroscopic mechanical properties of the blends. As observed for neat PMMA, crazing is found to occur for the macroscopically brittle PMMA/epoxy 90/10 blend. In contrast, the ductile blend with 20 wt % epoxy deforms via shear yielding which is preceded by cavitation. Shear yielding also occurs for blends having even higher epoxy contents, although it is not accompanied by the occurrence of dilatation processes. The changes in the scattering patterns during deformation are attributed to morphological changes like orientation. Cross-linking of the epoxy phase appears to have an important influence on the mode of microscopic deformation. A blend with 20 wt % un-cross-linked epoxy appears to deform via crazing instead of cavitation. The change in deformation mechanism is associated with the plasticization of crazes on a local level. The local strain is defined as the local deformation of the sample exposed to the incident beam as measured by recording the beam intensity in front of, and after, the sample during the drawing process. Thus, the local strain in the beam can accurately be measured and related to the corresponding scattering patterns. The local strain values obtained are in agreement with those from macroscopic tensile tests.