Traditional material requirements planning (MRP) does not consider the finite capacity of machines, and assumes fixed lead times. This paper develops an approach (material and capacity requirements planning; MCRP) to integrate capacity planning into MRP. To obtain a capacity feasible production plan, different measures for capacity adjustment such as alternative routeings, safety stock, lot splitting and lot summarisation, are discussed. Additionally, lead times are no longer assumed to be fixed. They are calculated dynamically with respect to machine capacity utilisation. A detailed example is presented to illustrate how the MCRP approach works successfully.