Thermoset resins are brittle and have a poor resistance to crack initiation and growth. This is attributed to their amorphous and highly cross-linked structure. In composite parts made from thermoset molding compositions such as Sheet Molding Compound (SMC) and Bulk Molding Compound (BMC), the initial stage of composite failure is attributed to the properties of the polyester based resin. Thus, improving resin properties by adding various additives has been an interesting area of research. In this work, Maleic anhydride-terminated polycaprolactone (MATPCL) was used to modify the flexural properties of unsaturated polyester (UP) resin. MATPCL was prepared in the lab and was added to UP at 3, 5, 10, 20, 40 and 50 percent by weight. Mechanical properties of the cured samples (flexural and impact strength) were determined and an almost linear increase in impact properties was observed with increasing the MATPCL content. Phase behavior of UP/MATPCL blends was inspected both visually and using scanning electron microscopy and, no gross phase separation was seen at the levels used. SMC was prepared in conventional method using chopped glass fibers and the resin formulation having 20 wt% of MATPCL. Thickening behavior, molding characteristics, mechanical properties and fracture behavior of the prepared sheets were determined and compared with the sheets made from non-modified UP resin.