Highly random copolymers of epsilon-caprolactone (CL) and D,L-lactide (LA) were synthesized by a new catalyst system, rare earth chloride-propylene oxide (PO) system. In the presence of propylene oxide, all rare earth chlorides tested are highly effective for the copolymerization. The influences of reaction conditions on the copolymerization catalyzed by the NdCl3-5PO system have been investigated in detail. The reactivity ratios of epsilon-caprolactone and D,L-lactide were determined and show that the copolymerization with this new rare earth catalyst is closer to ideal copolymerization than reported for other catalysts. The microstructure of copolymer analyzed by C-13-NMR shows that the monomer units in the copolymer is near to completely random distribution with a short average monomer sequence length. The DSC measurement confirms the high randomness of the chain structure. The mechanism studied by NMR indicates that the rare earth alkoxide generated by the reaction of rare earth chloride with propylene oxide initiates the copolymerization, and then proceeds via a "coordination-insertion" mechanism with acyl-oxygen bond cleavage of CL and LA.