The effects of two types of powder, lactose and corn starch, and of free moisture on the kinetics of fluid-bed granulation have been investigated using population balance modelling. A coalescence kernel that considered the deformation behaviour of the granules was used. The best fit of the experimental data was obtained for both materials by assuming that the granules underwent plastic deformation. The predicted cumulative number fractions were in very good agreement with the experimental data. The effect of free moisture (in the range of 5-10%) was investigated with lactose. The process was independent of the statistical distribution in free moisture within the approximate range 5-10%. The results suggest a local plasticity in fluid-bed spray granulation caused by the deposition of spray droplets onto the granules, with their subsequent absorption into the voids leading to regions of saturated voids.