This study explores the potential of crude lignin, extracted from coir fibers, an agricultural byproduct, as a sustainable filler in Poly(3-hydroxybutyrate-co-3-hydroxyvalerate) (PHBV) biodegradable blends. To enhance compatibility with the PHBV matrix, lignin was chemically modified using acetic anhydride (AL) and propionic anhydride (PL). These modifications were confirmed through FTIR, XRD, FE-SEM, EDX, and TGA analyses. The blends were prepared via melt compounding in a twin-screw extruder, followed by compression molding, with lignin microfillers incorporated at 1, 3, 5, and 7 wt% of dried PHBV. The addition of modified lignins improved the physical, mechanical, and thermal properties of the blends, with the optimal performance observed at 5 wt%, attributed to enhanced interfacial bonding. Two-way ANOVA with Tukey tests (p ≤ 0.05) confirmed statistical significance. However, at 7 wt%, all blends exhibited reduced performance due to lignin agglomeration, confirmed by morphology and tensile tests. Both modifications provided desirable multi-functional properties, but propionylated lignin-based blends outperformed those with acetylated and raw lignins, due to more effective substitution of non-polar groups, which improved filler-matrix miscibility. Fracture surface analysis, topography, and thermal evaluations validated these observations. These findings highlight chemically modified lignins, as effective, sustainable fillers for eco-friendly biopolymer composites suitable for packaging applications.