Poly(lactic acid) (PLA) is a stupendous alternative to conventional plastics in several applications such as packaging, cutlery, etc., although biodegradable PLA has drawbacks such as brittleness, poor processability and low thermal resistance. This study focuses on impact modification of PLA through melt blending with epoxidized neem oil (ENO), a cost effective, non-edible oil-based plasticizer with diversified properties as an anti-microbial and bio-pesticide. Neem oil was subjected to epoxidation and blended with virgin PLA (VPLA) using a twin-screw extruder at different weight ratios of 95/5, 92.5/7.5, 90/10 and 85/15. The fully green PLA/ENO blends were observed to have significant increase in impact strength and elongation-at-break with drop in glass transition (T-g), melting (T-m) and crystallization (T-c) temperatures. SEM images revealed good interfacial adhesion, to the extent of 10% (by weight) of ENO, which could be attributed to the enhancement of mechanical properties in the blends. The blend PLA/ENO10 showed maximum impact strength of 66 J/m (413% increase), elongation-at-break of 78% (VPLA: 3.5%) and higher heat deflection temperature of 90 degrees C (VPLA: 55 degrees C). Aerobic biodegradation study of PLA/ENO10 blend as per ISO 14855-1 indicated that 90% biodegradability was achieved within 96 days under controlled composting conditions and the obtained compost was non-toxic and supported plant growth. The ENO-modified PLA is a promising eco-friendly candidate for agricultural applications, such as nursery bags. [GRAPHICS] .