Poly(epsilon-caprolactone) and poly(3-hydroxybutyrate) (PCL/PHB) blends in two weight ratios (75/25 and 50/50) were reactively compatibilized in the presence of di-(2-tert-butyl-peroxyisopropyl)-benzene and dicumyl peroxide as free radical initiators. Rheological, mechanical, thermal properties and morphological features, as well as the chemical structure of PCL/PHB blends were investigated. It was found that regardless of PCL/PHB blend ratio, the viscosity of reactively compatibilized blends increased, approximately 4-fold for dicumyl peroxide and 7-fold for di-(2-tert-butyl-peroxyisopropyl)-benzene, which confirmed their partial branching/cross-linking. The results showed that studied peroxides are effective compatibilizers for PCL/PHB (75/25) blends. However, di(tert-butylperoxyisopropyl)benzene peroxide was more efficient and its application in PCL/PHB (75/25) blends resulted in significant increase of the tensile yield strength and elongation at break of 38% and 144%, respectively. On the other hand, the compatibilization effects of peroxides on tensile properties of PCL/PHB (50/50) blends were negligible. This is due to free-radical induced degradation of PHB and formulation of low molecular weight compounds. These degradation products can act as plasticizers and reduce the interfacial tension in the phase boundary, which corresponded to changes in morphology and chemical structure of studied PCL/PHB blends.