The present study explores solid-state cryomilling for the compounding of green composites. Herein, wood plastic composites (WPCs) composed of sawdust (SD) and poly(ε-caprolactone) (PCL) with various compositions were prepared. Two compounding techniques, namely, extrusion and cryomilling, were utilized to prepare WPC raw material pellets and powders, respectively, for comparison purposes. Flat pressing was further utilized to prepare WPC films for testing. Morphological, structural, thermal, mechanical, and surface wettability properties were investigated. Results indicate the advantages of cryomilling in producing WPCs. Scanning electron microscopy (SEM) along with optical micrographs revealed well ground SD particles and uniform distribution in the PCL matrix. Tensile strength and elongation at break of the composites declined with increasing SD content, however, the modulus of elasticity significantly increased. Water contact angles averaged less than 90°, implying partial wetting. Visual observations and thermo-gravimetric analysis (TGA) indicated thermal stability of composites during processing. In conclusion, PCL/SD WPC is a potential candidate to replace conventional plastics for packaging applications. This would also provide a much better utilization of the currently undervalued wood waste resources.