Wet granulation of a highly hydrophobic fine powder was investigated to elucidate the granule nucleation and growth processes in systems in which distribution of granulating fluid in the granulating mass is complicated by poor wetting. A mixture containing approximately 70 wt.% (90% by volume) of a micronized poorly wetting powder was granulated in a high-shear mixer using water and the microstructure of resultant agglomerates (granules) was studied using optical and electron microscopy as well as X-ray computed tomography (XRCT). The study revealed that granules are typically spherical or elliptical in shape and range in size from 200 to 500 pm. They are strong and consist of a consolidated powder shell and an empty core. Based on the microstructure, a nucleation mechanism for such a hydrophobic system is proposed. Implications for controlling granule growth and granule properties are discussed. This study demonstrates that well-controlled nuclei formation and subsequent granule growth is achievable in a highly hydrophobic system. (c) 2008 Elsevier B.V. All rights reserved.