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.