Nanocomposites based on biodegradable poly(epsilon-caprolactone) (PCL) and layered silicates (montmorillonite, MMT) were prepared either by melt intercalation with PCL or by in situ ring-opening polymerization of epsilon-caprolactone as promoted by the so-called coordination-insertion mechanism. Both non-modified clays (Na+-MMT) and silicates modified by various alkylammonium cations were studied. Mechanical and thermal properties were examined by tensile testing and thermogravimetric analysis. Even at a filler content as low as 3 wt% of inorganic layered silicate, the PCL-layered silicate nanocomposites exhibited improved mechanical properties (higher Young's modulus) and increased thermal stability as well as enhanced flame retardant characteristics as a result of a charring effect. It was shown that the formation of PCL-based nanocomposites depended not only on the nature of the ammonium cation and related functionality but also on the selected synthetic route, melt intercalation vs. in situ intercalative polymerization. Interestingly enough, when the intercalative polymerization of epsilon-caprolactone was carried out in the presence of MMT organo-modified with ammonium cations bearing hydroxyl functions, nanocomposites with much improved mechanical properties were recovered. Those hybrid polyester layered silicate nanocomposites. were characterized by a covalent bonding between the polyester chains and the clay organo-surface as a result of the polymerization mechanism, which was actually initiated from the surface hydroxyl functions adequately activated by selected tin (II) or tin (IV) catalysts.