Lignin-based polycaprolactone (LigPCL) copolymer was synthesized by both the ring opening reaction of ε-caprolactone with the hydroxyl groups in the lignin and the concomitant polymerization of ε-caprolactone. FTIR spectra showed C=O (1755 cm-1) and C-O (1202 cm-1) peaks confirming that the esterification reaction took place successfully between lignin and ε-caprolactone. T2, at which the weight loss of 2% occurs, of pristine lignin and LigPCL were measured as 63 and 211 ℃, respectively, and so the synthesized LigPCL had superior thermal stability to the lignin. PP/Lig-PCL blends were prepared at various contents of LigPCL up to 30 wt% by a melt extrusion process. In proportion to the content of the LigPCL, tensile strengths, flexural strengths, and tensile modulus of PP/LigPCL blends greatly decreased, but elongations at break of those greatly increased. To improve the compatibility between PP and LigPCL, maleic anhydride-grafted polypropylene (PP-g-MA) was added. SEM images for the fracture surfaces of the blends showed that the PP-g-MA was effective in reducing the domain size of dispersed phase. Thus, T2, tensile strength, tensile modulus, and elongation at break of a 70/30 blend of PP/LigPCL were enhanced by 6 ℃, 17%, 31%, and 79%, respectively, by the addition of PP-g-MA. This work clearly demonstrates that thermoplastic LigPCL could be desirably synthesized and applied for value added and eco-friendly products through common melt processes used for polymer blend or composites manufacturing.