The silk fibroin nanoparticles (SFNPs) were extracted from silkworm cocoons and used as a nanofiller in poly(lactic acid) (PLA)/poly(ε‐caprolactone) (PCL) blend. The nanoparticle localization was studied theoretically and experimentally and the effects of SFNP on the morphology, rheology, toughness, and dynamic mechanical properties of the blend were investigated. According to the calculated wetting coefficient, SFNP should be thermodynamically located in the PLA matrix during the melting process. The results of SEM illustrated a common sea‐island structure for the PLA/PCL blend and the incorporation of SFNP reduced the PCL domain sizes from 1.170 ± 92 μm to 794 ± 46 nm. The atomic force microscopy results showed that the nanoparticles are mainly located in the PLA matrix and also, partially at the phase interface with a thickness of layers around 80 nm. The rheological tests displayed the network formation of SFNP in the prepared nanocomposites. The dynamic mechanical analysis revealed that by the addition of SFNP, the storage modulus of neat PLA and PLA/PCL blend were increased by around 57 and 50%, respectively and the glass transition temperatures (Tg) values of PLA and PCL shifted toward each other. Additionally, using SFNP caused a lower water uptake and higher impact strength (~64%) of the blend.