Improvement of compatibility in blends of PCL and PLA has attracted the attention of the scientific community due to their complimentary mechanical properties. In this work, in situ nanofibrillation has been proposed as an ideal approach towards the green and economical production of PCL/PLA blends with an unparalleled level of compatibility of the blend components. Scanning electron microscopy showed that the transformation of the dispersed PLA phase into stretched nanofibrils drastically improved PCL/PLA interfacial adhesion. Investigations on the blends' crystallization behaviors using polarized optical microscopy, differential scanning calorimetry, and wide angle X-ray scattering suggested that the improvements in the nanofibrillar composites' (NFCs) compatibility could be associated with the increase in their compatibility due to PCL's heterogeneous crystal nucleation on the nanofibrillated PLA domains. This behavior was ascribed to a promotion of the epitaxial crystallization of the PCL on the nanofibrillated PLA's crystals following a change in the orientation of the PLA's crystal lamellae. The PCL's tensile properties were significantly improved after the inclusion of even small quantities (as low as 5 wt%) of the PLA nanofibrils. The tensile strength of the NFC with 15 wt% of the PLA was over 100% higher than that of the neat PCL. Dynamic mechanical analyses and shear rheology measurements showed substantial improvements in the PCL's elastic behavior after nanofibrillation. This effect was shown to improve the PCL's tensile strength via delaying the yield point during tension. The NFCs also showed dramatically improved oxygen barrier properties due to the improvements in the PCL-PLA compatibility.