Acetaldehyde is one of the well-known undesirable by-product formed during different stages of polyethylene terephthalate manufacturing process. The migration of acetaldehyde from polyethylene terephthalate, even at trace levels of 10-25 ppb is known to adversely impact organoleptic property of water and/or beverages. We are reporting for the first time in-situ formation of acetaldehyde in polyethylene terephthalate pellets due to the presence of residual levels of 2-methyl 1, 3-dioxolane in the final polymer. A new insight on generation of acetaldehyde through hydrolysis of 2-methyl 1, 3-dioxolane present in polyethylene terephthalate resin has been established through water spiking studies in a controlled environment. Further, systematic studies were conducted to also understand the mechanism of formation of 2-methyl 1, 3-dioxolane during the polyethylene terephthalate manufacturing.