In this article, the properties of a polycaprolactone and starch composite (PCL/starch) and an acrylic acid grafted polycaprolactone and starch composite (PCL-g-AA/starch) were examined by Fourier transform infrared spectroscopy, nuclear magnetic resonance, differential scanning calorimetry, Instron mechanical testing, and scanning electron microscopy. Mechanical properties of PCL became significantly worse when it was blended with starch, due to the poor compatibility between the two phases. Much better dispersion and homogeneity of starch in the polymer matrix was obtained when PCL-g-AA was used in place of PCL in the composite. Improved mechanical and thermal properties of the PCL-g-AA/starch composite, notably an increase in tensile strength at breakpoint, evidenced its superiority to the PCL/starch one. Furthermore, PCL-g-AA/starch was more easily processed than PCL/starch because the former had lower melt viscosity. (C) 2003 Wiley Periodicals, Inc.