Graphene-reinforced polymer nanocomposites are under intense investigation in recent years. In this work, graphene nanosheets have been prepared using chemical reduction method of graphene oxide. Graphene-reinforced epoxy nanocomposites show an enhancement in mechanical and thermal properties at 0.05wt.% of graphene in epoxy matrix. Modification of graphene with polyvinylpyrrolidone (PVP) shows the significant enhancement in mechanical and thermal properties of epoxy nanocomposites. PVP-modified graphene nanosheets reduces the gap of enthalpic and entropic penalties and facilitates improved dispersion of graphene in epoxy matrix. In addition, enhanced dispersion of PVP-modified graphene in epoxy matrix results in better load transfer across graphene-epoxy interface. Glass transition temperature (T-g) of PVP-modified graphene epoxy nanocomposites increases as compared to pure epoxy because there exist an interaction between epoxy and PVP. Fractography study reveals the localized ductile fracture.