Fumed silica (FS)-filled polydimethylsiloxane (PDMS) composite is widely used as the external insulating material in power grid. The function of PDMS composite is to keep the core of an insulation device being dry by preventing the permeation of outside water. To study water diffusion in PDMS composite helps to shed light upon the failure mechanism of the insulation devices. In this paper, positron annihilation lifetime spectroscopy (PALS) and electrochemical impedance spectroscopy (EIS) were applied to study the FS/PDMS interface structure and water diffusion in PDMS composite. It is found that the FS has two basic existing states in PDMS matrix: dispersed state and percolated state, and the percolation threshold of FS is fitted to be 6.0 wt.%. In the dispersed state, the FS particles are randomly dispersed in PDMS matrix. The values of tau(3) remain stable, being approximately 1.0 ns, indicating no overlaps of the FS/PDMS interfaces. Moreover, water cannot diffuse through the sample after corona aging. In the percolated state, the FS particles are tightly packed in the PDMS matrix. The values of tau(3) decrease with the weight fraction of FS, suggesting the overlapping of the FS/PDMS interfaces. As the FS percolates in sample bulk, these overlapped FS/PDMS interfaces provide continuous diffusion tunnels for water, thus resulting in failure of the composite after corona aging. It is found that polarization and discharge of the electrons at FS/PDMS interface under corona discharge is the main mechanism that leads to the failure of the composite bulk. [GRAPHICS] .