Miscanthus fibers reinforced biodegradable poly(butylene adipate‐co‐terephthalate) (PBAT) matrix‐based biocomposites were produced by melt processing. The performances of the produced PBAT/miscanthus composites were evaluated by means of mechanical, thermal, and morphological analysis. Compared to neat PBAT, the flexural strength, flexural modulus, storage modulus, and tensile modulus were increased after the addition of miscanthus fibers into the PBAT matrix. These improvements were attributed to the strong reinforcing effect of miscanthus fibers. The polarity difference between the PBAT matrix and the miscanthus fibers leads to weak interaction between the phases in the resulting composites. This weak interaction was evidenced in the impact strength and tensile strength of the uncompatibilized PBAT composites. Therefore, maleic anhydride (MAH)‐grafted PBAT was prepared as compatibilizer by melt free radical grafting reaction. The MAH grafting on the PBAT was confirmed by Fourier transform infrared spectroscopy. The interfacial bonding between the miscanthus fibers and PBAT was improved with the addition of 5 wt % of MAH‐grafted PBAT (MAH‐g‐PBAT) compatibilizer. The improved interaction between the PBAT and the miscanthus fiber was corroborated with mechanical and morphological properties. The compatibilized PBAT composite with 40 wt % miscanthus fibers exhibited an average heat deflection temperature of 81 °C, notched Izod impact strength of 184 J/m, tensile strength of 19.4 MPa, and flexural strength of 22 MPa. From the scanning electron microscopy analysis, better interaction between the components can be observed in the compatibilized composites, which contribute to enhanced mechanical properties. Overall, the addition of miscanthus fibers into a PBAT matrix showed a significant benefit in terms of economic competitiveness and functional performances. © 2017 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2017, 134, 45448.