Cardanol (CD) is used as a reactive compatibilizer, and blended with polylactic acid (PLA) and polypropylene carbonate (PPC) resin (70/30(w/w)) to obtain a series of PLA/PPC/CD blends. The systematic study was conducted on the thermal properties, optical properties, rheological properties, mechanical properties, and microscopic morphology of the blend, by varying amounts of CD added to the blends. A detailed explanation and comprehensive analysis of the reaction mechanism between CD and PLA/PPC have been made. The study found that CD acts as a “bridge” between the PLA and PPC, forming the structure of a block copolymer (PLA-b-CD-b-PPC), and the copolymer can greatly improve the compatibility of PLA and PPC. When the amount of CD reaches 8 wt%, only one Tg is observed in the blend, simultaneously, PLA/PPC has already transitioned from a partially compatible system to a completely compatible system. At the same time, the addition of CD does not have any negative impact on the thermal stability of the PLA/PPC blend under processing temperature conditions, and the thermal stability of the PLA/PPC/CD blends can even be improved under extreme conditions. In addition, the addition of CD allows the PLA/PPC/CD blends to maintain a high light transmittance while reducing the opacity of the blend (the light transmittance remains above 92 %, and the opacity is reduced from 37 % to about 24 %), demonstrating excellent optical properties. Moreover, the elongation at break and impact strength of the PLA/PPC/CD blend both show a trend of first increasing and then decreasing with the increase of CD amount. When the CD amount varies within the range of 6– 8 wt%, the blends undergoes a brittle-ductile transition, and its toughness is greatly improved while the rigidity can also meet practical needs. When the amount of CD in the system increases to 12 wt%, the toughness of the blend reaches its peak, and its elongation at break and impact strength reach 513.24 % and 9211.5 J/m2 respectively (increased to 2442.84 % and 270.73 % of the PLA/PPC blend). Concurrently, the fracture surface of the blend exhibits large-scale plastic flow in the direction of the applied force, with marked shear yield phenomena, showing obvious characteristics of tough fracture.