The invention discloses multifunctional waste PET and polypropylene in-site fiber-forming composite material prepared from a multi-component compatiblizing and toughening agent. The multi-component controllable reactive compatiblizing and toughening agent is prepared from polypropylene, an elastomer 1, an elastomer 2, a difunctional group reactive monomer, a second monomer and a peroxide initiator. Then, multifunctional waste PET is prepared from an antioxidant and the prepared multi-component controllable reactive compatiblizing and toughening agent and waste PET; and finally, the in-site fiber-forming composite material is prepared by compounding the prepared multifunctional waste PET with polypropylene. The in-site fiber-forming composite material prepared by the technical scheme of the invention has obviously improved toughness (the notch impact strength of a cantilever beam) and rigidity (tensile yield stress and bending elastic modulus) in comparison with the raw material polypropylene and has relatively good reproducibility of mechanical performance; meanwhile, the invention also changes a great amount of waste which mainly refers to waste PET domestically generated every year into resources, thereby having remarkable economic and social benefits.