Poly(epsilon-caprolactone) [PEC], a biodegradable aliphatic polyester, undergoes a two-stage degradation process: The first lengthy phase involves nonenzymatic hydrolytic cleavage of ester groups, the second phase beginning when the polymer is more highly crystalline, and of low molecular weight. The cellular events of the second phase were examined by implanting gelatin capsules containing 25 mg of low molecular weight (Mn 3000) PEC powders, 106 to 500 micron, in rats. PEC fragments ultimately were degraded in phagosomes of macrophages and giant cells, the process requiring less than 13 days for completion at some sites. PEC was also identified within fibroblasts. These studies support the intracellular degradation of PEC as the principal pathway of degradation once the molecular weight of the aged polymer is reduced to 3000 or less.