Poly(propylene carbonate) (PPC) was chemically modified by chlorine through water phase suspension chlorination reaction, and the product was named as chlorinated poly(propylene carbonate) (CPPC). C-13 NMR results showed that the PPC was successfully chlorinated by this method. GPC results indicated that the molecular weight of CPPC dropped considerably owing to the degradation of PPC during chlorination reaction. The prepared CPPC was then melt-blended with maleic anhydride end-capped PPC (PPC-MA) and thermoplastic starch (TPS) to investigate the effects of CPPC on the compatibility, rheological and mechanical properties of PPC-MA/TPS blends. It was found that CPPC could enhance the interaction between PPC-MA and TPS. Therefore, moderate addition of CPPC could efficiently improve the compatibility of PPC-MA/TPS blends and a perfect co-continuous structure was formed. Due to the improved compatibility, rheological investigation revealed that the blends with CPPC exhibited a non-terminal behavior at low frequencies and a pronounced shear thinning behavior at high frequencies. Moreover, tensile strength, elongation at break and Young's modulus of the blends simultaneously increased with increasing the CPPC content up to 5.0 wt%, which is also ascribed to the improved compatibility. Thereafter, they decreased with further increasing the CPPC content because of the reduced compatibility and poor mechanical properties of CPPC. The optimal mechanical properties of PPC-MA/TPS blends could be obtained when the content of CPPC was 5.0 wt%, at which elongation at break, tensile strength and Young's modulus could reach 22.4%, 12.7 MPa and 611.3 MPa, separately.