A novel poly(ethylene terephthalate)-poly(caprolactone) block copolymer (PET-PCL) is synthesized in a reactive twin-screw extrusion process. In the presence of stannous octoate, ring-opening polymerization of epsilon-caprolactone is initiated by the hydroxyl end groups of molten PET to form polycaprolactone blocks. A block copolymer with minimal transesterification is obtained in a twin-screw extruder as a consequence of the fast distributive mixing of epsilon-caprolactone into high melt viscosity PET and the short reaction time. The PET-CL structure is characterized by IV, GPC, H-1-NMR, and DSC. Fully drawn and partially relaxed fibers spun from PET-PCL are characterized by WAXD and SAXS. A substantial decrease in the oriented amorphous fraction appears to be the major structural change in the relaxed fiber that provides the fiber with the desired stress-strain characteristics.