In this study, novel polystyrene-b-poly(ethylene-butylene)-b-polystyrene (SEBS)/thermoplastic polyurethane (TPU)/organo-modified montmorillonites (OMMT) nanocomposites were prepared by melt mixing. Three different organo-modified montmorillonites, DK2, DK3, and DK4 (listed in descending order of hydrophilicity) were selected. The compatibilizing and reinforcing effects of OMMT on the structure, morphology, thermal stability, mechanical and rheological properties of the SEBS/TPU blends were studied. It was found that the hydrophilic DK2 nanoparticles were largely located in the continuous TPU phase and partially dispersed at the phase interphase, whereas DK3 and DK4 nanoparticles were preferentially located at the phase interface with an intercalated/exfoliated and intercalated structure, respectively. Scanning electron microscopy (SEM) results showed that SEBS/TPU/OMMT nanocomposites exhibited a more densely organized and interconnected structure compared with SEBS/TPU blends. Better thermal property was achieved after adding DK3, with the tensile properties of the SEBS/TPU increased considerably. Rheological analysis revealed that hydrophilic DK2 nanoparticles were more effective in improving rheology properties and showed a more pronounced nonlinear effect. The prepared SEBS/TPU/OMMT nanocomposites displayed desired thermal, mechanical and rheological properties, which are important for many applications. POLYM. ENG. SCI., 2020. (c) 2020 Society of Plastics Engineers