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This is the first study investigating how polycarbodiimide (PCDI) delays thermal degradation of poly(lactic acid)/natural rubber blends (PLA/NR) during the preparation of PLA/NR masterbatches (MB) and PLA/MB compounds for the film blowing process. The PCDI concentration used in this work was from 0 to 1 wt%. The torque plastograms, FTIR, and 1H-NMR spectra indicated the successful chain extending reaction between the PCDI carbodiimide group and the PLA carboxyl group, and there was no reaction with NR domains. The reaction increased the PLA/MB compounds’ viscosity and improved processability and mechanical properties of PLA/MB blown films. The optimal PCDI content for the highest melt strength, film blowing stability, and mechanical properties was at 0.25 wt% PCDI. Undesirable gel spots were observed in the PLA/MB blown film at PCDI concentrations higher than 0.5 wt%.