Abstract: This invention relates to a method of preparing polyurethane foam which comprises the steps of forming an isocyanate-terminated prepolymer by reacting a polyisocyanate with a copolymer having an --OH-functionality greater than 2.00 but less than 3.00 derived from an .epsilon.-caprolactone, an epoxide and a mixture polyhydric alcohol chain initiators; and reacting said prepolymer in the presence of a blowing agent and a catalyst with a reactant mixture which comprises a chain extending agent having at least two functional groups each containing an active hydrogen atom, dissolved in a liquid copolymer of a lactone and an epoxide. The polyurethane foams are useful in the manufacture of shoe soles.