The interest to use cellulose fibres as reinforcement in polyolefin polymers started since middle of 1980, mainly because of the good mechanical properties, low cost and abundance of cellulose fibres. The most studies have been focussed on the adhesion problem between hydrophilic cellulose and hydrophobic polymers and not on the processing of these materials. Therefore the compounding process of cellulose fibre polyolefin composites by extrusion is still a challenge. The main problems on the processing of the composites is the difficulty in handling of the cellulose fibres, the poor dispersion of the fibres into the polymer matrix, the thermal sensitivity of cellulose and the reduction of the fibre length. The goal of this study has been to understand how the nature of cellulose fibres and the process will affect the dispersion and aspect ratio of the fibres. Two different cellulose fibres were used, softwood and hardwood and the matrix was polypropylene (PP). The fibres were pelletized to be able to feed these into the extruder. The materials were compounded with a co-rotating twin screw extruder followed by compression moulding to test samples. The fibre content was fixed at 20 and 30 wt%. The composites flow properties and microstructures were studied in order to optimize the dispersion of the fibres in PP matrix. The fibermaster and image analysis were used to study how the fibre length was affected by the extrusion process.