Connected and automated vehicles (CAVs) hold great promise in enhancing transportation operations and roadway capacity. However, there is still limited guidance in the field of highway capacity analysis to help agencies account for the potential benefits. This paper investigates the impact of CAVs on the capacity of two-way-stop-controlled (TWSC) intersections and quantifies capacity adjustments under different CAV scenarios. An isolated TWSC intersection is considered in this research to analyze the CAV impacts on various intersection movement capacities under different CAV market penetration rates (MPRs) and conflict flow rates (CFRs). To model CAVs, cooperative adaptive cruise control (CACC) is considered because it directly impacts the vehicle’s longitudinal car-following behavior and therefore the capacity. Additionally, enhanced gap-acceptance behavior based on vehicle-to-vehicle (V2V) communication is included because it can benefit minor road movements via advanced notifications. This paper collects data from customized, well-calibrated TWSC simulation models constructed in commercially available software. The results show that with the increase in MPRs, CAVs can substantially enhance the capacity of the stop or yield controlled movements, and the improvement is more significant under low CFR scenarios. CAVs can also reduce the follow-up headway and thus improve the potential capacity based on the existing HCM TWSC capacity estimation method. Finally, based on the data collected from the simulation, a capacity adjustment factor (CAF) table is proposed for HCM implementation.