Subcritical fluids assisted reactive extrusion is a novel and promising alternative technique for preparation of wood plastic composites. Because subcritical fluids have moderate process condition, well swollen performance, and excellent dissolvability. Therefore, subcritical fluids are led into the extruder system to alleviate the thermal degradation of wood flour, to reduce the melt viscosity of matrix, and to strengthen the mass transport. The wood flour is expanded in the presence of subcritical ethanol, which favors the permeability. Fourier transform infrared spectroscopy confirms that maleic anhydride grafted polypropylene (PP‐g‐MA) is grafted onto cellulosic chain, and subcritical ethanol promotes the grafting and swollen reaction. A possible mechanism is proposed to explain the effect of subcritical ethanol on the interfacial reactions. In addition, the thermal stability of wood flour, PP, and wood flour/PP composites are studied. Fracture morphology is observed to confirm the interfacial adhesion of wood flour/PP composites. The results suggest that subcritical ethanol leads to a change of crystalline structure of cellulose via X‐ray diffraction. Moreover, the mechanical properties of wood flour/PP composites increase dramatically, while 3‐Aminopropyltriethoxysilane (KH550) is used as co‐solvent dissolving in ethanol. Experimental results reveal that wood flour/PP composites in the presence of subcritical ethanol with 2% KH550 (190°C, 2.4 MPa, and 120 r/min), whose tensile strength, flexural strength, flexural modulus, and non‐notched impact strength increase by 45, 56, 29, and 36%, respectively, possess the best physical properties comparing to those during extrusion without fluids. POLYM. COMPOS., 39:3594–3604, 2018. © 2017 Society of Plastics Engineers