A lack of understanding of the structure–property relationship of the polylactic acid (PLA)-based polymer composite system makes it a challenge to manufacture products with optimized mechanical performance by precisely regulating the microscopic structure and morphology. Herein, we chose the PLA/polyethylene oxide (PEO) blend as a model to investigate the structural reason for the enhanced ductility and toughness of this kind of material. We have demonstrated that a considerable amount of the PLA mesophases exist in the melt quenched films that display high ductility and toughness, in contrast to the PLA crystals in their counterparts of slowly cooled films that are dominated by brittle fracture. The mesophase formed by melt quenching is attributed to a moderate acceleration of PLA chain mobility due to the plasticizing effect of the flexible PEO. In situ experiments have revealed the further formation of oriented mesophases induced by tensile deformation, which presents a high consistency between the content increase and the tensile stress intensification. We illustrate that the mesophases directly develop into a microfibrillar morphology to transmit the external stress and prevent crack propagation under deformation. This work emphasizes the essential role of the PLA mesophase in acquiring the enhanced ductility and toughness of the PLA/PEO composite films, which may be generalized to other similar PLA-based polymer composite materials.