Medium voltage (MV) cross linked polyethylene (XLPE) insulated power cables are being used in electrical power distribution system networks throughout the world. Deterioration like voids, cracks, delimitation, protrusions and contaminants in the cable insulation may initiate water tree, electrical tree and partial discharge. Water treeing is the main cause of insulation failure in MV power cables. The nonlinear dielectric response of water tree generates harmonics in the AC loss current. This paper presents a detailed study of the characterization of XLPE cable insulation. The morphological study of XLPE cable samples has been carried out by using the Scanning Electron Microscope (SEM) and the chemical analysis has been carried out by using Fourier Transform Infrared spectroscopy (FTIR). The MATLAB/SIMULINK program has been used to model and simulate degradation in the power cable due to water tree. This model is simulated with supply frequencies at 50 Hz, 100 Hz and 150 Hz. The 3 rd harmonic current has been recorded from the total current flowing through the cable insulation. The generated harmonics have a good relationship with degradation caused by water tree. © 2012 IEEE.