A novel polymer blend system consisting of poly(L-lactide) (PLLA) and a thermotropic liquid crystalline polymer (LCP: an aromatic polyester comprising poly(4-hydroxybenzoate) sequences) was investigated in the presence and absence of a polycabodiimide (PCD). Scanning electron micrographs of the injection-molded polymer blends revealed the formation of fibrous structure of LCP in the PLLA matrix, supporting the efficient toughening. In particular, the LCP fibrils became semimicrometer in diameter in the presence of PCD with which both PLLA and LCP had reacted during the melt blending to form their block and graft copolymers working as compatibilizer. The blend specimens containing LCP in 20-30 wt % were found to hold high dynamic storage-moduli (E') at high temperature. In addition, the E' value of the specimens containing 30 wt % of LCP reached 10.7 GPa at room temperature, being significantly higher than that of PLLA.