Developing biodegradable materials as alternative to petroleum based materials is highly desirable due to the problem of plastic pollution and shortage of petroleum-based energy. In this context, the authors have developed bio-based polylactic acid-starch (PLA/St) composite materials with Poly-1,4-butylene glycol adipate diol (PBA)-based polyurethane prepolymer (PBAPU) as a compatibilizer. The fourier transform infrared spectroscopy (FT-IR), scanning electron microscopy (SEM), X-ray diffraction (XRD), and other test results show that the compatibility between starch and polylactic acid-starch (PLA) is improved by using the PBAPU compatibilizer. This is due to the polyurethane bond formed as a result of the reaction between the NCO group in polyurethane prepolymer and the OH group in starch. Furthermore, the structures of the soft segments in polyurethane prepolymer and the polylactic acid matrix which belong to the aliphatic polyesters with similar solubility parameters are also very compatible. The results suggested that a novel interface layer is formed between hydrophobic PLA and hydrophilic starch. Consequently, the ensuing PLA/St composite material exhibit increased interfacial compatibility between polylactic acid and starch, with significant improvements in the thermodynamic as well as the mechanical properties. Certainly, this research has significance in the field of bio-based plastics, resource utilization, and environmental protection.