Chitosan was dissolved in 2 % aqueous acetic acid solution and the films were prepared by solution casting. Values of tensile strength (TS), tensile modulus (TM), elongation at break (Eb %) and water vapor permeability (WVP) of the chitosan films were found to be 30 MPa, 450 MPa, 8 % and 4.7 g mm/m2 day kPa, respectively. Poly(caprolactone) (PCL) films were prepared from its granules by compression molding and the values of TS, TM, Eb and WVP were 14 MPa, 220 MPa, 70 % and 1.54 g mm/m2 day kPa, respectively. PCL was reinforced with chitosan films, and composite films were prepared by compression molding. Amount of chitosan in the composite films varied from 10 to 50 % (w/w). It was found that with the incorporation of chitosan films in PCL, both the values of TS and TM of composite films increased significantly. The highest mechanical properties were found at 50 % (w/w) of chitosan content. The Oxygen transmission rate (OTR) of composite film was found to decrease significantly than PCL films. Thermal properties of the composite were also improved as compared to PCL. The water uptake test of the composite also showed promising results with a good stability of composite films. The interface of the composite was investigated by scanning electron microscopy and showed good interfacial adhesion between PCL and chitosan films.