The efficiency of twin-screw extrusion process to fibrillate cellulose fibers into micro/nanosize in the same step as the compounding of green bionanocomposites of thermoplastic starch (TPS) with 10 wt % fibers was examined. The effect of the processing setup on micro/nanofibrillation and fiber dispersion/distribution in starch was studied using two types of cellulose fibers: bleached wood fibers and TEMPO-oxidized cellulose fibers. A composite with cellulose nanofibers was prepared to examine the nanofiber distribution and dispersion in the starch and to compare the properties with the composites containing cellulose fibers. Optical microscopy, scanning electron microscopy, and UV/Vis spectroscopy showed that fibers were not nanofibrillated in the extrusion, but good dispersion and distribution of fibers in the starch matrix was obtained. The addition of cellulose fibers enhanced the mechanical properties of the TPS. Moisture uptake study revealed that the material containing TEMPO-oxidized fibers had higher moisture absorption than the other composites. © 2013 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2014, 131, 39981.