This project aims to improve the machinability of wood-plastic composites by understanding chip and built-up edge formation, so as to help manufacturers optimize cutting performance and product quality. Chip formation and built-up edge were studied during orthogonal cutting of wood polyethylene composite with cemented carbide cutters under different conditions. During the orthogonal cutting process, segmental, ribbon, and element chips were generated. The cutting depth was found to have a great impact on the types of chips that formed. Additionally, a built-up edge was found during wood-plastic composite machining, with debris only attaching to the tool's rake face due to thermo-mechanical coupling. Such built-up edges hinder cutting stability and surface quality. Furthermore, variations in the accumulation of debris on the built-up edge corresponded to changes in cutting force and temperature. In fact, both cutting force and temperature proved to be inversely related to the rake angle and positively correlated to the cutting speed and depth. Therefore, to achieve better cutting stability and surface quality for wood-plastic composites, a larger rake angle and a reduced cutting depth are recommended because they reduce the accumulation of debris and the formation of built-up edge.