Optimized extrusion melt-blending of polylactic acid (PLA) polymer with a minor biopolymeric phase, polybutylene adipate terephthalate (PBAT), and compatibilized with random ethylene-methyl acrylate-glycidyl methacrylate terpolymer (EMA-GMA, Trademark: Lotader AX-8900) led to an outstanding improvement in mechanical properties. At the noncompatibilized PLA-PBAT (80-20) blend point, significant enhancement (∼4500%) in toughness and elongation-at-break was already obtained without compromising any elastic properties. The effect of the compatibilizer content on the mechanical properties of the PLA-PBAT (80-20) blend was investigated by an optimal custom response surface methodology. Thus, 2 wt % Lotader content was determined to be optimal by a numerical optimization methodology with a desirability value, D, of 0.882 to maximize toughness and elongation-at-break. The compatibilization and thermal behavior of the Lotader-modified blends were analyzed by scanning electron microscopy (SEM), differential scanning calorimetry (DSC), and thermogravimetric analysis (TGA). Upon adding the compatibilizer, the original phase-separated morphology of the blends changed from PBAT quasi-spherical domains to nearly elongated elliptical ones. It was also found that the interfacial boundary line of the domains faded away, which revealed that interfacial compatibility was achieved. The thermostability of the blends remained largely unaltered following the incorporation of PBAT and Lotader. Moreover, while PBAT exhibited a minor influence on the crystallinity of PLA, Lotader had no discernible impact on crystallinity, as evidenced by the DSC thermograms. Thus, the compatibilizer at the optimal point in the optimized blend ratio led to the formation of a phase-separated morphology that combined internal cavitation, interfacial cavitation, and strong adhesion features at the right proportions in the microstructure which underlies the micromechanisms driving the remarkable enhancement of as much as 7100% in toughness and ductility.