Polyethylene cables, as important transmission equipment of modern power grid, would inevitably be slightly damaged, which seriously threatens the safety of the power supply. This paper has pioneered the preparation and typical performances of a self-healing polyethylene insulating composite. The self-healing performance to structural damage was verified by tests of electrical and mechanical damage. The effect mechanism of doping microcapsules on the electrical performance of polyethylene was emphatically analyzed. The results show that in appropriate conditions (such as 60 • C/30 min), the composite can not only repair the electrical tree and scratches, but also restore the insulation strength of damaged area. The effect of doping microcapsules on the electrical performances of polyethylene, such as breakdown strength, volumetric resistivity, dielectric properties, and space charge characteristics, are mainly related to impurity and the interface of microcapsule. Polarization and ionization of impurities can reduce the electrical performance of polyethylene. The interface not only improves the microstructure of polyethylene (such as how the heterogeneous nucleation effect increases the number of crystal regions, and the anchoring effect enhances the stability of amorphous regions), but also increases the charge traps. Moreover, the microstructure and charge trap can affect the characteristics of carrier transport, material polarization, and space charge accumulation, thus improving the electrical performance of polyethylene. In addition, the important electrical performance of the composite can meet the basic application requirements of polyethylene insulating material, which has good application prospects.