In the past 70 years, over 8 billion tons of plastics have been produced, the majority of which cannot be fully biodegraded, causing their fragments to be found everywhere in the biosphere, including living organisms. Herein, a group of biodegradable composites were produced by blending poly(butylene adipate-co-terephthalate) (PBAT) with technical lignin through a twin-screw extrusion method. Two strategies were developed to improve the mechanical properties of PBAT/lignin composites: (1) modifying lignin via methylation to reduce hydrogen bonding between −OH groups and (2) enhancing the intermolecular interactions between PBAT and lignin by adding maleic anhydride-graft-PBAT as a compatibilizer. The composites obtained from the two strategies with 60 wt % lignin contents exhibited ideal tensile performance which could meet the requirement of the Chinese National Standard for packaging. The interactions between different composite components were investigated by morphological and thermal analyses. The results showed that when lignin is used as filler in the composites, the molecular mobility of lignin and the size of its agglomerates remarkably impacted the ductility and mechanical strength of the PBAT/lignin films. A simple cost comparison between neat PBAT film and PBAT/lignin composite films indicated that the latter was economically competitive, and the production costs could significantly reduce by 36%.