In this study, clays (C30B, C20A, and ) with different interlayer modifier and localization are investigated to improve mechanical properties of poly(lactic acid) (PLA)/thermoplastic polyurethane (TPU) blend based on crystallization, morphology, and rheology analyses. The mechanical properties of the PLA/TPU 70/30 blend (elongation at break: 229%, impact strength: 55 J/m) are additionally increased by the clay particles. Depending on modifiers within the particles localized at the interface, 0.1 wt% of the C30B maximizes elongation at break (289%) while 0.1 wt% of the C20A maximizes impact strength (81 J/m) due to its influence on crystal structure of PLA. Thermal analysis through differential scanning calorimeter shows that hydrophilic C30B induces ductile α' PLA crystal formation while less hydrophilic C20A induces stiff α crystal formation, which is reflected on the mechanical properties. In addition, there exists optimum degree of crystallinity for the desired mechanical properties. The excessive interfacial‐localized clay is found to interfere PLA/TPU interaction. Meanwhile, natural clay, enhances mechanical properties of blend with the reduced distance between the TPU droplets with a 0.3–3 wt% addition. In addition, rheological properties help us to design the blend and annealing condition for the desirable mechanical properties.