Polymer solar cells (PSCs) with high power conversion efficiency (PCE) and environment-friendly fabrication are the main requirements enabling their production in industrial scale. While the use of non-halogenated solvent processing is inevitable for the PSC fabrication, it significantly reduces the processability of polymer donors (P_DS) and small-molecule acceptors (SMAs). This often results in unoptimized blend morphology and limits the device performance. To address this issue, hydrophilic oligoethylene glycol (OEG) side-chains are introduced into a P_D (2EG) to enhance the molecular compatibility between the P_D and L8-BO SMA. The 2EG P_D induces higher crystallinity and alleviates phase separation with the SMA compared to the reference P_D (PM7) with hydrocarbon side-chains. Consequently, the 2EG-based PSCs exhibit a higher PCE (15.8%) than the PM7-based PSCs (PCE = 14.4%) in the ortho-xylene based processing. Importantly, benefitted from the reduced phase separation and increased crystallinity of 2EG P_DS, the 2EG-based PSCs show enhanced thermal stability (84% of initial PCE after 120 h heating) compared to that of the PM7-based PSCs (60% of initial PCE after 120 h heating). This study demonstrates the potential of OEG side-chain-incorporated materials in developing efficient, stable, and eco-friendly PSCs.