Peat, the organic matter formed from incomplete degradation of vegetation in peatlands, was studied as lignocellulosic raw material in manufacture of biocomposites. Peat mosses with varying degree of decomposition, namely slightly decomposed peat (H2) and moderately decomposed peat (H6), were ground into different particle size fractions which were used to prepare peat-polypropylene (PP) composites with 50 wt% peat content using extrusion compounding. The moisture absorption and dimensional stability as well as the mechanical properties and microstructure before and after cyclic freeze-thaw conditioning of the peat-PP composites were analysed and compared to reference wood-plastic composite (WPC). The mechanical properties of peat-PP composites were better than the properties of reference WPC before the freeze-thaw conditioning, and the mechanical permanence of peat-PP composites was better after the cyclic conditioning. Especially when peat with higher decomposition degree was used (H6), the mechanical permanence of peat-PP composites was improved. Likewise, the moisture absorption and the dimensional stability properties were improved the more decomposed the used peat was. The particle size did not affect the composite properties as much as the decomposition degree of peat, though the dimensional stability of peat-PP composite with moderately decomposed peat was better with smaller particle size peat.