The biodegradability and mechanical and thermal properties of composite materials made from maleic anhydride-grafted polycaprolactone (PCL-g-MA) and agricultural residues (rice straw fiber, RSF) were evaluated. Composites of PCL-g-MA and RSF (PCL-g-MA/RSF) exhibited noticeably superior mechanical properties compared to those of PCL/RSF due to greater compatibility of PCL-g-MA with RSF. The dispersion of RSF in the PCL-g-MA matrix was highly homogeneous due to ester formation between the anhydride groups of PCL-g-MA and the hydroxyl groups of RSF that resulted in the formation of branched and cross-linked macromolecules. In addition, the PLA-g-MA/RSF composites were more easily processed due to their lower melt viscosity. Water resistance of PCL-g-MA/RSF was higher than that of PCL/RSF, although weight loss of composites buried in soil compost indicated that both were biodegradable, especially at high levels of RSF substitution. The PCL/RSF and PCL-g-MA/RSF composites were more biodegradable than pure PCL, which implies a strong connection between RSF content and biodegradability.