Modified poly (vinyl alcohol) (VE-PVA)/poly (ethylene glycol) (PEG) composites were prepared by solution blending. The effect of molecular weights, contents and different categories of PEG on the properties of the composites was studied. The thermal, mechanical and rheological properties of the composites were characterized by DSC, DMA, mechanical test and dynamic rheological test. The results show that VE-PVA and PEG are phase separated systems, and each of the individual components shows its own melting temperature. PEG hinders VE-PVA crystallization, resulting in crystallization and nucleation rates decreasing. PEG can act as plasticizer and lubricant for VE-PVA, thus reducing the melt viscosity, improving system processing performance. The content of hydroxyl group in PEG is critical for VE-PEA plasticization. The higher content leads to better plasticizing effect. PEG can improve the ductility of VE-PVA/PEG composites when the mass fraction of PEG is under 10%.