In this study, the impact strength and elongation properties of a bacterial biopolymer, polyhydroxyutyrate-co-valerate (PHBV) co-polymer were improved with different functionalized vegetable oils, and nano structured Polyhedral Oligomeric Silsesquioxane (POSS). PHBV was blended with functionalized oils, epoxidized linseed oil, epoxidized soybean oil, and epoxy soyate using twin screw melt processing, and samples for testing were prepared by injection molding. PHBV was also blended with POSS and blend of PHBV with and without epoxy soyate were also prepared. The materials were characterized by impact strength testing, tensile testing, dynamic mechanical analysis, differential scanning calorimetry, and scanning electron microscopy studies. The studies showed that the impact strength was improved 92% with the epoxy soyate, which is a chemically modified version of epoxidized soybean oils by reaction with alcohols. The impact strength was further improved (120%) compared to neat PHBV synergistically with the addition of POSS to PHBV-epoxy soyate blend. With the addition of POSS to the PHBV-epoxy soyate system, elongation was improved 105%. It was also observed that with the addition of functionalized oils and POSS, the melting temperature of the PHBV was reduced more than 10°C which is very important for the processing of PHBV.