By using gamma-butyrolactone (gamma-BL) as the reaction media, highly active catalysts - light rare earth chloride-epoxide-gamma-BL- for the solution polymerization of epsilon-caprolactone, have been obtained for the first time. With these catalyst, PCL with molecular weight as high as 40x10(4)(Mv) can be prepared at 60 degrees C for 1.5 hr. The amount of epoxide in catalyst solution, catalyst aging temperature and time affect the catalyst activity significantly. The mechanism study shows that in gamma-BL, the weakening of Ln-Cl bonds by the donation of coordinated gamma-BL with Ln(3+) and the homogenous effect promote the reaction between light rare earth chloride and epoxide. The produced rare earth alkoxide initiates CL polymerization via a ’coordination-insertion’ mechanism with acyl-oxygen bond cleavage.