Carbide slag, an industrial waste produced by calcium carbide hydrolysis to prepare C2H2 gas, was successfully used as inorganic filler in the production of polyvinyl chloride (PVC)‐wood composites. carbide slag had an average diameter of 8.1 μm which thermally decomposed at about 450°C, and its main component was Ca(OH)2. Incorporating carbide slag into PVC‐wood composites substantially decreased the flexural, tensile, and impact strength of the composites as a result of the poor interfacial adhesion between carbide slag and PVC matrix, which could be evidently observed from the scanning electron microscopy (SEM) study. To give carbide slag better use, silane coupling agent KH570 were chose to modify carbide slag. The results indicated that adding carbide slag modified by KH570 (MCS) into PVC‐wood composites could significantly improve its notched impact strength and flexural modulus. The thermogravimetric analysis (TGA) data showed that with the addition of MCS, composite had better thermal stability. It also turned out that with the addition of MCS, its smoke suppression property and flammability were enhanced effectively. To ensure sufficient properties of PVC‐wood composites, the optimal adding content of MCS was 20 phr and it leaded to remarkable performance (its flexural modulus was 3.4 GPa, notched impact strength was 3.87 KJ/m2, limiting oxygen index value was 41.5% and smoke density ranting was 55.1%), all of which endowed PVC‐wood composites better utilization. All the results indicated that the preparation of PVC‐wood composites with carbide slag could resolve environmental pollution, reuse carbide slag in different fields, and provide a new method for resource utilization of carbide slag. POLYM. COMPOS., 38:2898–2906, 2017. © 2015 Society of Plastics Engineers