The poor compatibility and aggregation propensity of lignin in nonpolar polymer matrices greatly limits its application in polymer blends and composites. We demonstrate an efficient, solvent-free, and catalyst-free microwave-assisted approach for hydrophobization of alkali lignin to enhance its compatibility with polylactide. Effective modification with up to 98% substitution of lignin’s hydroxyl groups was achieved under mild and catalyst-free reaction conditions. The modified acetylated and hexanoated lignins exhibited enhanced thermal stability and thermoplasticity, which were reflected by the good melt-extrusion and 3D printing properties of the corresponding polylactide/lignin blends. The tensile properties varied somewhat depending on the degree and type of substitution and the amount of hydrophobized lignin but in general the tensile properties were in the same range as those of polylactide. Blends consisting of up to 50 weight-% acetylated lignin were successfully extruded to filaments and 3D printed, demonstrating good processability and tensile properties regardless of the high lignin content, while it was not possible to extrude continuous filaments of polylactide and nonmodified alkali lignin even at low concentration (10 weight %). Additionally, the polylactide/acetylated lignin blends exhibited antioxidant activity as revealed by radical scavenging ability and improved thermo-oxidative stability with up to 40 °C increase in oxidation induction temperature compared to neat polylactide. The sustainable compatibilization strategy proposed herein paves the way for value-added utilization of lignin in fully biobased 3D printing filaments with improved oxidative stability.