This study was aimed to identify the best approach of incorporating cellulose nanocrystals (CNCs) into a poly(lactic acid) (PLA) matrix by examining two different CNC addition approaches. The first approach consisted of melt‐blending (MB) PLA and CNCs in a three‐piece internal mixer whereas the second method involved direct dry‐mixing of PLA and CNCs in a high intensity mixer. The compounded materials were then blown into films and compared in terms of particle dispersion, optical, thermal, molecular weight and barrier properties. Good distribution was achieved by both the direct dry‐ and MB methods. However, some agglomerations were still present that resulted in reduced transparency of the composite films. Furthermore, the PLA/CNC films thermally degraded during the blending processes indicated by the drop in their molecular weights due to chain scissions. More chain scissions occurred in melt‐blended (MB) films than the dry‐blended (DB) counterparts. The addition of only 1% CNCs into the PLA matrix by the direct dry‐ and MB approaches improved the water barrier properties of PLA films by 30% and 24%, and oxygen barrier properties by 60% and 39%, respectively. The inferior performance of the MB films compared to the direct DB counterparts could be attributed to more chain scissions in these films. Thus, the direct dry‐blending (DB) process appeared to be the better approach of incorporating CNCs into the PLA matrix. POLYM. ENG. SCI., 58:1965–1974, 2018. © 2017 Society of Plastics Engineers