Abstract: A composite yarn formed of melt-fusible thermoplastic fibers combined with selected other fibers and/or materials includes a containment barrier that encapsulates one or more core materials which may present a threat of contamination to workers and/or the environment. The composite yarn includes a core covered by an adhesive layer of thermoplastic material which forms a containment barrier, combined with one or more subsequent overlying layers of fibers wrapped or otherwise applied thereto using conventional yarn construction methods. In a preferred embodiment the core material is coated with a liquid adhesive, and preferably a polyester-based polyurethane which contains silicon grit, just prior to being wrapped with one or more layers of fibers which form the containment barrier. The cured and finished composite yarn is designed for knitting and weaving fabrics, or for otherwise forming cordage and non-woven products.