Driven by the motive of minimizing the transportation costs of raw materials to manufacture wood–plastic composites (WPCs), Part I and the current Part II of this paper series explore the utilization of an alternative wood feedstock, i.e., pellets. Part I of this study reported on the characteristics of wood flour and wood pellets manufactured from secondary processing mill residues. Part II reports on the physical and mechanical properties of polypropylene (PP)-based WPCs made using the two different wood feedstocks, i.e., wood flour and wood pellets. WPCs were made from 40-mesh wood flour and wood pellets from four different wood species (white cedar, white pine, spruce-fir and red maple) in the presence and absence of the coupling agent maleic anhydride polypropylene (MAPP). With MAPP, the weight percentage of wood filler was 20%, PP 78%, MAPP 2% and without MAPP, formulation by weight percentage of wood filler was 20% and PP 80%. Fluorescent images showed wood particles’ distribution in the PP polymer matrix was similar for both wood flour and ground wood pellets. Dispersion of particles was higher with ground wood pellets in the PP matrix. On average, the density of composite products from wood pellets was higher, tensile strength, tensile modulus and impact strength were lower than the composites made from wood flour. Flexural properties of the control composites made with pellets were higher and with MAPP were lower than the composites made from wood flour. However, the overall mechanical property differences were low (0.5–10%) depending on the particular WPC formulations. Statistical analysis also showed there was no significant differences in the material property values of the composites made from wood flour and wood pellets. In some situations, WPC properties were better using wood pellets rather than using wood flour. We expect if the material properties of WPCs from wood flour versus wood pellets are similar and with a greater reduction in transportation costs for wood pellet feedstocks, this would be beneficial to WPC manufacturers and consumers.