The effect of expanded vermiculite (e-VMT) was evaluated relative to the physical, mechanical, and flame retardancy performance of flat-pressed wood plastic composites (WPCs). Various contents of e-VMT (2.5, 5, 7.5, 10, 15%) were added instead of wood flour (WF) to the matrix. Due to the hydrophilic nature of the WF, water absorption (WA) and thickness swelling (TS) of WPCs increased as compared to neat polymer-based panels. Meanwhile, e-VMT incorporation limited the WA and TS values. As expected, the lowest WA and TS values were obtained from the highest e-VMT-reinforced WPCs. The addition of e-VMT was also found to enhance the mechanical properties of WPCs. As the e-VMT content increased and the WF content decreased, there was an improvement in flexural strength, modulus of elasticity (MOE), and tensile strength. Compared to the neat polymer panels, the MOE of WPCs increased by up to 77%. Additionally, the flame retardancy performance of WPCs improved with e-VMT reinforcement, with limiting oxygen index (LOI) values increasing up to 24%. Scanning electron microscopy (SEM) images also demonstrated the favorable integration of e-VMT with matrix, thereby improving the mechanical properties. The inconsistency between WF and polymer was also well-observed, highlighting the tendency of WF to interact easily with water.