An improved aqueous cathodic electrocoating composition that contains an anti-crater agent which is a water-reducible polyester resin having an acid value less than 40 mg KOH/g. The water-reducible polyester is the reaction product of (1) a hydroxy cyclic carbonate; (2) a polycarboxylic acid anhydride; (3) optional monofunctional epoxy resin; (4) a polyfunctional epoxy resin; and, (5) a polyamine compound containing tertiary amine and either primary or secondary functionality. The reaction product is neutralized in the presence of acid and water to convert the tertiary amine groups to water-dilutable groups. Hydrolyzable silane groups can also be incorporated into the reaction product to further enhance its crater resistance property. The electrocoat composition produces coatings having a smoother appearance with fewer craters without adversely affecting intercoat adhesion of the cured film to subsequent coating layers applied thereover.