Poly(lactic acid) (PLA) is a well-known sustainable plastic but with an inherent brittleness, slow crystallization rate, and poor heat resistance, which significantly limits its application. In this work, toughened PLA with a balanced tensile strength, fast crystallization rate, and great heat resistance was obtained by dynamic vulcanization with an unsaturated liquid crystalline polyester (PBDPSM) in the presence of a free radical initiator of dicumyl peroxide (DCP). PBDPSM is efficient in enhancing the tensile toughness of PLA in that the elongation at break of PLA significantly increased from 15 to 179% while adding only 1 wt % PBDPSM. When adding 8 wt % PBDPSM, the PLA/PBDPSM8 blend has an elongation at break of 265%, tensile toughness of 107.2 MJ/m³, and notched Izod impact strength of 22.5 kJ/m². Moreover, it keeps a high tensile strength of 62.6 MPa. In addition, the crystallization rate of PLA has dramatically accelerated due to the apparent nucleation effect induced by DCP and PBDPSM. PLA/PBDPSM3 shows the highest crystallinity with 44.4%. Furthermore, it shows a high Vicat softening temperature of 152.2 °C, which is 92.2 °C higher than that of neat PLA. Finally, highly toughened PLA materials with balanced tensile strength and good heat-resistant properties were realized.