The process of morphology formation in a binary blend of poly(epsilon-caprolactone) (PCL) and polystyrene oligomer (PSO) has been observed at various temperatures and compositions by small-angle X-ray scattering (SAXS) employing synchrotron radiation. A strong scattering at smaller angle was observed during the morphology formation in addition to the intensity maximum arising from the crystalline region consisting of the alternate stacks of lamellae and amorphous layers. These SAXS curves indicate a possible coexistence of the crystalline region and the amorphous region (rich in PSO) throughout the morphology formation in the blend. The time dependence of parameters characterizing the crystalline region is similar in features to that of the crystallization of homopolymers, suggesting that the rate of morphology formation is substantially controlled by the crystallization of PCL. The analysis based on the combination of the paracrystalline lattice model developed by Hosemann and the two-phase model by Debye and Bueche shows that phase separation takes place simultaneously with crystallization of PCL on the morphology formation to determine the details of the complicated morphology in the present system.