Based on a customized time-domain optical coherence tomography (OCT) system, a series of signal processing approaches have been designed and reviewed. To improve demodulation accuracy and image quality, demodulation approaches such as median filter, Hilbert transform, and envelope detector were investigated with simulated as well as experimental data. Without noise, the Hilbert transform has the best performance, but after considering the narrow-band noise in the modulated signal, the envelope detector was selected as the ideal demodulation technique. To reduce noise and enhance image contrast, digital signal processing techniques such as a bandpass filtering and two-dimensional median filtering were applied before and after the demodulation, respectively. Finally with integration of the customized OCT setup and designed signal processing algorithms, aerospace materials, such as polymer coatings and glass-fiber composites, were successfully characterized. The cross-sectional images obtained clearly show the microstructures of the materials.