The primary objectives of the study were to characterize the critical properties of wood flour produced using highly deteriorated beetle-killed spruce for wood-plastic composite (WPC) production and evaluate important mechanical and physical properties of WPC extruded using an industry standard formulation. Chemical composition analysis indicated no significant differences in wood constituents between highly deteriorated and sound wood. Preliminary investigation with Fourier transform infrared spectroscopy (FTIR), however, indicated partial degradation or depolymerization of carbohydrate components in highly deteriorated wood compared to sound wood from green trees; effects of these changes could be seen in cell collapse and poor interaction between thermoplastic matrix and deteriorated wood fiber. Physical and mechanical properties of extruded WPCs manufactured from highly deteriorated material were comparable to WPC properties produced using pine wood flour that served as a control material. POLYM. ENG. SCI., 49:129-136, 2009. (C) 2008 Society of Plastics Engineers