This paper presents an investigation on the effect of temperature and raw material on microstructure of fine cellular foam used as the insulation of coaxial cables. A set up was prepared and used to produce fine cellular foamed insulation. As the physical blowing agent, butane was used. The effect of temperature on the microstructure of polyethylene (PE) was worth to note. At high temperature, due to low melt strength, large cells with low cell density was observed. As the temperature was decreased, the number of nucleated cells was increased and also a decrese in cell size was observed. Too law a temperature, caused a decrese in number of nucleated cells. To investigate the effect of raw material on microstructure, a blend of polyethylene (LDPE-HDPE) was used. This blend, via increasing the melt strength, led to a microstructure with150 micron cell size. Finally, the attenuation property of the produced cable with optimum microstructure was compared with a same cable produced with chemical foam insulation. The results showed 17% reduction in attenuation property of the coaxial cable with physical foam insulation.