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This paper investigates the effects of polyethylene glycol (PEG), on the mechanical and thermal properties of nalidixic acid/poly ε-caprolactone (NA)/PCL blends prepared by hot melt extrusion. The blends were characterized by tensile and flexural analysis, dynamic mechanical analysis, differential scanning calorimetry, thermogravimetric analysis and X-ray diffraction. Results show that loading PEG in the PCL had a detrimental effect on the tensile strength and toughness of the blends, reducing them by 20–40%. The partial miscibility of the PCL-PEG system, causes an increase in Tg. While increases in the crystallinity is attributed to the plasticisation effect of PEG and the nucleation effect of NA. The average crystal size increased by 8% upon PEG addition. Experimental data indicated that the addition of NA caused loss of the tensile strength and toughness of PCL. Thermal analysis of the PCL showed that on addition of the thermally unstable NA, thermal degradation occurred early and was autocatalytic. However, the NA did benefit from the heat shielding provided by the PCL matrix resulting in more thermally stable NA particles.