Wood plastic composites (WPCs) are a new class of “green” construction materials which combine the advantages of wood with those of plastics. WPCs are made by compounding wood flour with a variety of plastics by extrusion. An important issue with these materials is moisture absorption and consequent fungus growth. Proper processing, though, allows wood flour to be encapsulated with a layer of (hydrophobic) polymer. Therefore, it is important to determine optimized operating conditions that result in minimized rate of water absorption by WPCs. In addition, since exfoliated layered silicates are known to improve barrier properties, organoclay can be added into the polymer matrix to determine how this affects mechanical properties and water absorption. In this study, WPCs were prepared by adding 50 wt% wood flour to polypropylene using a Leistritz micro-27 twin screw extruder; samples were made both in the co-rotation and counter rotation mode with two different screw speeds and different feeding rates. Polypropylene grafted maleic anhydride (PP-g-MA) was used as the coupling agent for wood and PP. In addition, since PP-g-MA is also used as a compatiblizer for organoclay and PP, three times of PP-g-MA to clay was added in the matrix to replace PP. The extruded strands were pelletized, dried and injection molded into mechanical testing specimens using a Battenfeld injection molding machine. The tensile and flexural properties of WPCs were determined by an Instron universal tester and the reversed notched Izod impact strength was determined by a BLI impact tester. Three unnotched impact samples were immersed in water and the rate of water absorption was determined by blot and weigh method. It was found that moduli of WPCs were improved by 20% in the presence of 10wt% of organoclay in the matrix. Furthermore, the modulus of WPCs processed by the counter rotation screws were 3~5% higher than that processed by co-rotation screw. The rate of water absorption was strongly affected by these factors. Samples processed by a counter rotation screw absorbed 3.88 wt% water after 1000 hours in a water absorption test while samples processed by co-rotation screws absorbed 6.22 wt%. The feeding rate, which can be translated into residence time of WPCs in the extruder, affects the rate of water absorption, too. Samples produced with low feeding rate and longer residence time tend to absorb less water.