In the present study, the properties of polycaprolactone (PCL) and wood flour (WF) blends were examined by Fourier transform infrared (FTIR) spectroscopy, differential scanning calorimetry (DSC), Instron mechanical tester, and scanning electron microscopy (SEM). As for results, the mechanical properties of PCL were lowered obviously, due to the poor compatibility between the two phases, when it was blended with wood flours. A fine dispersion and homogeneity of wood flour in the polymer matrix could be obtained when the acrylic acid grafted PCL (PCL-g-AA) was used to replace PCL for manufacture of blends. This better dispersion is due to the formation of branched and crosslinked macromolecules since the PCL-g-AA copolymer had carboxyl groups to react with the hydroxyls. This is reflected in the mechanical and thermal properties of the blends. In comparison with pure PCL/WF blend, the increase in tensile strength at break was remarkable for PCL-g-AA/WF blend. The PCL-g-AA/WF blends are more easily processed than the PCL/WF ones since the former had lower melt viscosity than the latter. (C) 2004 Wiley Periodicals, Inc.