In this research work, biocomposites based on a ternary system containing softwood Kraft lignin (Indulin AT), poly-L-lactic acid (PLLA) and polyethylene glycol (PEG) have been developed. Two binary systems based on PLLA/PEG and PLLA/lignin have also been studied to understand the role of plasticizer (i.e., PEG) and filler (i.e., lignin) on the overall physicomechanical behavior of PLLA. All samples have been prepared by melt-blending. A novel approach has also been introduced to improve the compatibility between PLLA and PEG by using a transesterification catalyst under reactive-mixing conditions. In PEG plasticized PLLA flexibility increases with increasing content of PEG and no significant effect of the molecular weight of PEG on the flexibility of PLLA has been observed. Differential scanning calorimetry and size-exclusion chromatography along with FTIR analysis show the formation of PLLA-b-PEG copolymer for high temperature processed PLLA/PEG systems. On the other hand, binary systems containing lignin show higher stiffness than PLLA/PEG system and good adhesion between the particles and the matrix has been observed by scanning electron microscopy. However, a concomitant good balance in stiffness introduced by the lignin particles and flexibility introduced by PEG has been observed in the ternary systems. This study also showed that high temperature reactive melt-blending of PLLA/PEG leads to the formation of a segmented PLLA-b-PEG block copolymer. (c) 2012 Wiley Periodicals, Inc. J. Appl. Polym. Sci., 2013