In this paper, to understand the self-healing phenomenon of insulation (i.e., recovery of insulation level) for water-tree cables when an applied voltage is removed, the self-healing mechanism of water tree is discussed. A water-needle electrode is used in an accelerated water-tree aging experiment for XLPE (Cross Linked Polyethylene) cables. The dielectric dissipation factor increases with aging time, but it gradually returns to a lower level once the applied voltage is removed, which means that the self healing of the water tree cables possibly occurs during the process. Depending on the geometric size by micro observations of water-tree slices, a water-tree model is constructed for electric field simulation. According to analysis of the electric field force and the mechanical properties of water tree region, the self-healing force generated by the elastic deformation of the molecular chains results in the shrinking of the channels. The water is gradually squeezed out of the channels, which causes the gradual decrease of conductivity and relative dielectric constant in channels. According to the computation of dielectric dissipation factors at different states of water tree, the reduction of dielectric dissipation factors can be mainly caused by the decrease of conductivity and relative dielectric constant in channels.