This Thesis presents a study on feasibility of continuous extrusion processing for the manufacture of fine-celled plastic/wood-fiber composite foams. The main benefits of incorporating wood-fibers in plastics are the increased stiffness and lowered cost of the resulting composites. However, these improvements are usually accompanied by loss in the ductility and impact resistance of the composites. These shortcomings can be removed by effectively foaming and incorporating a fine-cell structure in the composites. Moisture removal is an important requirement for improving the foam structure. Various schemes of online moisture removal were explored and a promising process for the production of fine-celled plastic/wood-fiber composites foams has been developed. HDPE/wood-fiber composite foams, with significantly improved cell structure and a high volume expansion ratio up to nine-fold, have been successfully produced. For less stringent requirements, the feasibility of using the water, inherently present in the wood-fiber, as a blowing agent was also explored. The addition of a nucleating agent significantly improved the cell structure of PS/wood-fiber composite foams.