A fracture mechanics analysis based on the J‐integral method was adopted to determine the resistance of composites with various concentrations of wood‐flour and ethylene acrylate copolymer (EAC) to crack initiation (Jin) and complete fracture (Jf). The Jin and Jf energies of unmodified poly(lactic acid) (PLA)/wood‐flour composites showed the deleterious effect of incorporating wood fibers into the plastic matrix by significantly decreasing the fracture toughness of PLA as the wood‐flour content increased. The reduced fracture toughness of the matrix induced by adding brittle wood‐flour into PLA was well recovered by impact modification of the composites with EAC. Microscopic morphological studies revealed that the major mechanisms of toughening were through the EAC existing as separate domains in the bulk matrix of the composites which tended to act as stress concentrators that initiated local yielding of the matrix around crack tips and enhanced the toughness of the composites. © 2012 Society of Chemical Industry