The invention relates to a impact-modified bio-degradable polymer composition having large particle size impact modifiers dispersed in a continuous biodegradable polymer phase. The impact modifiers have a core-shell morphology and have average sizes of greater than 250 nm. The impact-modified composition has good impact properties and low haze. The biodegradable polymer is preferably a polylactide or polyhydroxy butyrate. The composition comprises 30-99.9 weight percent of degradable polymer and 0.1 to 15 weight percent of one or more impact modifiers.