Biodegradable nanocomposite is one of the next generation materials. Cellulose fibrils in micro and nano scales, which are environmentally friendly and have potential lightweight and high strength, can be used to make biodegradable nanocomposites. The purposes of this research were to characterize the fibrils isolated from Lyocell fiber by a novel mechanical process and to discover weather the fibril reinforced biodegradable nanocomposites yield greater mechanical properties. The geometrical characteristics of the fibrils were investigated using polarized light microscopy (PLM) and scanning electron microscopy (SEM), and their crystallinity was investigated by wide angle X-ray diffraction (WAXD). The degree of fibrillation of the fibers is evaluated by water retention value (WRV). Fibril-reinforced nanobiocomposites, consisting of a biodegradable polymer (PLA) and fibrils were prepared by compression molding, evaluated by tensile test, and their morphological characteristics were investigated with SEM. The fibrils increased both tensile modulus and strength of polymer matrix, but a poor adhesion between fibrils and the matrix was still observed by SEM.