The action of thermo-mechanical degradation induced by mechanical recycling of poly(ethylene terephthalate) was simulated by successive injection moulding cycles. Degradation reactions provoked chain scissions and a reduction in molar mass mainly driven by the reduction of diethyleneglycol to ethylene glycol units in the flexible domain of the PET backbone, and the formation of –OH terminated species with shorter chain length. The consequent microstructural changes were quantified taking into account a three-fraction model involving crystalline, mobile amorphous (MAF) and rigid amorphous fractions (RAF). A remarkable increase of RAF, to a detriment of MAF was observed, while the percentage of crystalline fraction remained nearly constant. A deeper analysis of the melting behaviour, the segmental dynamics around the glass-rubber relaxation, and the macroscopic mechanical performance, showed the role of each fraction leading to a loss of thermal, viscoelastic and mechanical features, particularly remarkable after the first processing cycle.