A novel plasticizer (lacti-glyceride) synthesized by esterification of glycerol with l-lactic acid was developed for thermal processing of PVA/PLA blend. Meanwhile, the stannous octoate (Sn(Oct)(2)) was used as the catalyst for the transesterification reaction of PVA, PLA, and the plasticizer. The results showed that the PVA/PLA blends plasticized with lacti-glyceride have improved thermal processability and mechanical properties compared to those plasticized with glycerol, because the lacti-glyceride may act not only as a plasticizer but also as a compatibilizer for PVA and PLA. SEM images indicated that PVA/PLA blends catalyzed with Sn(Oct)2 had better compatibility than those without catalyst. Water contact angle measurements showed that the PVA/PLA blends plasticized with lacti-glyceride have much more hydrophobic surfaces than those blends plasticized with glycerol. The blends will find wider applications than PVA.