It is generally accepted that the benefit of anisotropic nanofiller addition is strongly dependent on the state of the dispersion of these fillers in a polymer matrix. In this paper the influence of melt-compounding conditions on the dispersion of a needle-like clay, i.e. sepiolite, in poly(e-caprolactone) (PCL) is investigated. The crystallisation behavior as well as the rheological and mechanical properties of PCL/sepiolite nanocomposites with filler contents up to 5 wt.% are studied. By changing the screw speed during melt-mixing in a micro-compounder, the state of dispersion was varied, with the higher speed leading to better dispersion and breakdown of the sepiolite agglomerates or bundles. Rheometry showed that better dispersed nanocomposites displayed an increase in viscosity due to network formation at slightly higher filler loadings. Likewise, better dispersed composites showed a modest increase in crystallisation temperature at low filler content, accompanied by a decrease in both nucleation efficiency and degree of crystallisation at higher loadings. Better dispersed nanocomposite systems also showed superior mechanical properties, particularly at higher filler loadings. However, overall the reinforcing efficiency of sepiolite in all nanocomposites was relatively low. This was mainly a consequence of the relatively low filler aspect ratio and the simultaneous breakup of sepiolite needles together with a breakdown of bundles during compounding.