In this paper, ball-milling method was used to prepare a kind of polyvinyl chloride (PVC)/ chlorinated polyethylene (CPE) master-batch named MGC. The toughening and strengthening effect of MGC on PVC and its mechanism were studied. Compared with PVC/CPE, the tensile strength, elongation at break and impact strength of PVC/MGC (Y2G0.5) composites were increased by 1.39%, 92.11% and 472.91%, respectively. Results show that cladding of CPE on the surface of PVC primary particles, along with the grafted copolymer PVC-g-CPE can improve the two-phase interface generated during the two-step ball-milling process. Then, a network structure of CPE phase is formed, which also promote the increment of the stress field volume until a whole stress network is build. The formation of phase and stress network structure can effectively terminate the crazing and induce the matrix to yield completely, finally result in a ductile fracture.