This research explores the effects of nanographene on the cell morphology, mechanical strength, and water uptake behavior in the extrusion foaming of wood polymer composites. Composite materials containing high-density polyethylene, wood flour, coupling agent, graphene nanoplatelets (GNPs), and azodicarbonamide as a foaming agent were melt compounded using a twin-screw extruder. Finally, the samples were foamed via a batch process using a compression molding machine. Thereafter, the morphological aspects of the specimens including cell size and cell density were characterized using a scanning electron microscope. Further, the density, flexural strength, tensile strength, water absorption, and thickness swelling of the specimens were evaluated. Results indicated that the cell size of the specimens was found to decrease with the incorporation of GNPs while the cell density increased, owing to the reinforcing effect of the GNPs in the composites. The cell nucleation efficiency of the samples using GNPs was significantly enhanced when compared to that without nanoparticles. The density of composite foams decreased with the addition of GNPs due to more bubble nucleation originating from nanoparticles. Mechanical properties of the specimens improved when using GNPs in comparison to those of foams without GNPs as a result of better interaction with the polymeric matrix. The highest flexural and tensile values were observed for the composite foams containing 1 phr GNPs. Furthermore, the water absorption and thickness swelling of the samples were remarkably reduced with the addition of GNPs. The specimen foams produced with 4 phr GNPs exhibited superior water resistance and dimensional stability.