Polyglycolic acid (PGA) with outstanding biodegradability and gas barrier is promising in the packaging field. Unfortunately, the poor toughness limits its application. Biodegradable and flexible polycaprolactone (PCL) was used to improve the toughness, and multifunctional epoxy polymers (MEPs) were selected as reactive compatibilizers. The spreading coefficient model indicated that MEP would be encapsulated by the dispersed phase of PCL in PGA/PCL/ MEP blends. Terminal carboxyl/hydroxyl groups of both PCL and PGA can in situ react with MEP, and the compatibility between PGA and PCL was improved greatly. The dimension of PCL domains decreased to 0.9 μm with 0.75 wt % of MEP. The fracture toughness of PGA/PCL increased by 370%, while the tensile strength increased to 49.6 MPa. When the total content of MEP was more than 0.75 wt %, excess MEP would migrate to the PGA matrix, resulting in an increase in the viscosity of the PGA matrix and a morphology evolution of PGA/ PCL blends from "sea-island" to the "co-continuous-like" structure. Therefore, this work will provide a facile method to prepare toughened sustainable green PGA-based materials with balanced strength.