Wood-fiber composites make use of cellulose fibers as a reinforcing filler in the polymer matrix and are known to have a lower material cost and a higher stiffness than neat polymers. However, the lower material cost and enhanced stiffness of wood-fiber composites are achieved at the expense of other properties such as the ductility and impact strength. Since microcellular plastics exhibit a higher impact strength, higher toughness, and increased fatigue life compared to unformed plastics, microcellular foaming of wood-fiber composites will improve the mechanical properties of the composites and therefore increase the usefulness of the materials. In this paper, microcellular foamed PVC/wood-fiber composites with unique cell morphology and material composition are characterized. Microcellular structures are produced in PVC/wood-fiber composites by first saturating the composite samples with CO2 under high pressure followed by rapidly decreasing the solubility of gas in the samples. The void fraction of the microcellular foamed PVC/wood-fiber composites is controlled by tailoring the composition of materials and the foaming process parameters. The results indicate that tensile and impact properties of microcellular foamed PVC/wood-fiber composites are most sensitive to changes in the cell morphology and the surface modification of fibers.