Biodegradable composites from starch and hydrophobic polymer usually show poor compatibility. A novel p-phthaloyl chloride-based prepolymer (PCP) compatibilizer based on p-phthaloyl chloride and polycaprolactone (PCL) diol (2000) was synthesized successfully and the chemical structure was characterized by Fourier transform infrared spectra and 1H nuclear magnetic resonance (NMR). The PCP compatiblizer was mixed with starch granules to form a coating layer, and then the coated starch granules were melt-compounded with PCL plastic to prepare compatible starch-PCL composites with enhanced properties. The structural, mechanical, thermal properties, and water absorption of the composites were then investigated. It was found that the composites containing the PCP compatibilizer showed better interfacial interaction and compatibility between starch and PCL domains compared to the pure starch-PCL composite, which led to the improved mechanical properties of the composites. The results were attributed to the ester linkage between the PCP compatibilizer and starch as well as the strong physical crosslinking between the PCP compatibilizer and PCL plastic through PCL-PCL crystallinity.