The usefulness of cotton waste as a source of reinforcing fibers for the preparation of cost-effective and biodegradable composites has been investigated. Biodegradable polyester (bionolle 3020) is melt-compounded together with cotton fibers. Maleic anhydride-grafted bionolle (bionolle-g-MA) is used as a compatibilizer. The grafting reaction is carried out in an intensive mixer in the presence of dicumyl peroxide as initiator. The effects of fiber and compatibilizer content as well as graft content are evaluated by mechanical property measurements and scanning electron microscopy. The compatibilizer improved all mechanical properties significantly. Moreover, the water absorption and swelling of composites decreased, while the thermal stability increased slightly. Also, the biodegradation of the polyester bionolle 3020, as well as that of its composites with cotton fibers, were studied. (C) 2003 Wiley Periodicals, Inc.