In this study the effect of interfacial localization of 1 wt% cellulose nanocrystals (CNCs) was investigated on the morphology, rheology, thermal, and mechanical properties of poly (lactic acid), PLA (semicrystalline (sc) and amorphous (a)) and poly (butylene adipate-co-terephthalate), PBAT, blends (75/25 wt%). Different mixing strategies were adopted using solution casting followed by melt mixing to localize CNCs at the interface of PLA/PBAT blends. Scanning electron microscopy (SEM) and atomic force microscopy (AFM) confirmed this localization. The interfacial localization of CNCs significantly impeded the relaxation of the dispersed PBAT droplets in the PLA/PBAT blends and converted the droplet/matrix morphology of the scPLA/PBAT blend nanocomposites into a co-continuous one resulting in a solid-like rheological behavior. Also, CNCs played the role of nucleating agents in the PLA/PBAT blends and improved the crystallization behavior of scPLA and PBAT. Although Young's modulus and yield strength decreased in the neat PLA/PBAT blends, interfacial localization of CNCs improved these properties (mostly in scPLA/PBAT) to be closer to those values of neat PLAs, accompanied by improved elongation at break from ∼3% (scPLA (+IMM)) to ∼150% (scPLA/PBAT/CNC) and impact strength from ∼20 J/m (scPLA (+IMM)) to ∼95 J/m (scPLA/PBAT/CNC). These improvements were less effective in the aPLA/PBAT/CNC due to less effectiveness of CNC localization at the interface because of more residual solvent in aPLA/PBAT/CNC, better affinity of CNCs with solvent compared to polymers and more spherical PBAT dispersed phase compared to that in scPLA/PBAT/CNC blend nanocomposites.