Although thermoplastic starch (TPS) is a good candidate to overcome the limitations of poly(lactic acid) (PLA) due to its relatively low cost and high flexibility, the toughness and barrier properties of PLA/TPS blends are still insufficient for film applications. Therefore, the present work aims to improve the performance of PLA/TPS blend by simultaneous biaxial stretching and partially replacing PLA with poly(butylene adipate-co-terephthalate) (PBAT) for packaging film applications. PLA/TPS and PLA/PBAT/TPS sheets were prepared by melt cast extrusion and simultaneously biaxially stretched to form films. The mechanical, morphological, thermal, and water vapor and oxygen barrier properties and crystallinity of both intermediate sheets and their corresponding stretched films were examined. After stretching, PLA/TPS and PLA/PBAT/TPS blends showed markedly improved extensibility, impact strength, crystallinity, water vapor and oxygen barrier properties, and surface hydrophobicity. The stretched films demonstrated stacked-layer planar morphology, in which their outermost layers were a biodegradable polyester-rich phase. The synergistic effects of simultaneous biaxial stretching and partial replacing PLA with PBAT were extremely impressive for toughness improvement. The stretched films have the potential to replace non-biodegradable plastic packaging films, particularly where good mechanical and barrier properties are required.