Owing to the renewability and abundance of lignin, over the last two decades, a greater amount of interest has been shifted towards the development of lignin-based copolymers for renewable and sustainable film preparation. Therefore, due to worldwide demand and attention for this kind of work, a two-stage modification method has been proposed in this work. Where firstly, chemical modification of alkali lignin (AL) was carried out with itaconic acid (IA) to enhance compatibility and reactivity. This itaconic acid-modified lignin (IAL) was further grafted with a monomeric unit of ɛ-caprolactone (CL) to synthesize lignin-grafted polycaprolactone copolymer (IAL-PCL). The chemical modification and grafting were confirmed through FT-IR, NMR, and XPS by analyzing the characteristic peaks of IA and CL, respectively. Changes in thermodynamic properties due to chemical modification and grafting were evaluated from TGA and DSC analysis. An increase in water contact angle (65° to 87°) indicates an increase in grafting when the copolymer was synthesized with a higher CL amount. Excellent flexibility and improved mechanical properties, i.e., 2.2 MPa tensile strength and >
38 MPa elastic modulus confirm the improvement in compatibility between lignin and PCL chain of IAL-PCL copolymer film, which was mainly induced due to the incorporation of IA onto lignin.