Present study developed a novel additive, epoxidized cardanol grafted polylactide (PLA-g-ECA), derived from biomass cardanol. The compatibilization effect of PLA-g-ECA for polylactide (PLA) and poly(butylene adipate-co-terephthalate) (PBAT) blend was thoroughly investigated. Fourier transform infrared spectroscopy (FT-IR), thermogravimetric analysis (TGA), and proton nuclear magnetic resonance ( 1 H NMR) measurements validated the successful grafting of epoxidized cardanol onto PLA, with a grafting amount of approximately 1.65 wt %. It was confirmed that PLA-g-ECA preferentially reacted with the PBAT phase, followed by entanglement with the PLA phase, leading to a compatibilization process. Compared to the pristine blend, the compatibilized blend presented a more blurred phase boundary with decreased PBAT particle size (from 0.55 to 0.43 μm) upon the addition of 10 wt % PLA-g-ECA. The enhanced interfacial adhesion increased the elongation at break and notched impact strength of the compatibilized blend to 251% and 12.5 kJ/m 2 , respectively, approximately 2.7 and 1.3 times that of the pristine blend. Moreover, the compatibilized blend exhibited improved crystallization performance, and the crystallinity of PLA increased from 6.3 to 45.0%. This work enriched the design of compatibilizer for the PLA/PBAT blend and provided a novel approach for expanding the application of biomass cardanol.