The application of bamboo fibers (BFs) as a reinforcing filler in polylactic acid (PLA) is hindered by their poor compatibility owing to the intrinsic hydrophilia of BFs and the hydrophobicity of PLA. To solve this issue, cardanol (CD) and epoxidized cardanol glycidyl ether (ECGE) were used as compatibilizers to strengthen and toughen PLA/BF bio‐composites, to the best of our knowledge, preparing PLA/BF/CD and PLA/BF/ECGE bio‐composites. The impact strengths of the synthesized bio‐composites increased from 7.75 to 23.75 and 7.75 to 23.95 kJ/m2, respectively, compared with that of a PLA/BF composite without compatibilizer. The investigation of the mechanical properties, crystallization, fractured surface morphology, and solvent stress‐cracking resistance properties revealed that the toughening mechanism of the PLA/BF/CD bio‐composites are mainly based on the plasticization of CD, which results in high impact toughness but low tensile strength. Moreover, the modification with ECGE improves the impact and tensile strengths of the bio‐composite owing to the following factors: (1) the epoxy groups of ECGE generate strong interactions with the BF surface and PLA to form an enhanced interfacial structure; (2) when present at high concentrations, chain extension reaction between ECGE and PLA to increase the molecular chain entanglement of PLA; and (3) upon curing and crosslinking, ECGE forms an entangled network structure that toughens the matrix.