A series of TPU nanocomposites were prepared by incorporating organically modified layered silicates with controlled particle size. To our knowledge, this is the first study into the effects of layered silicate diameter in polymer nanocomposites utilizing the same mineral for each size fraction. The tensile properties of these materials were found to be highly dependent upon the size of the layered silicates. A decrease in disk diameter was associated with a sharp upturn in the stress-strain curve and a pronounced increase in tensile strength. Results from SAXS/SANS experiments showed that the layered silicates did not affect the bulk TPU microphase structure and the morphological response of the host TPU to deformation or promote/hinder strain-induced soft segment crystallization. The improved tensile properties of the nanocomposites containing the smaller nanofillers resulted from the layered silicates aligning in the direction of strain and interacting with the TPU sequences via secondary bonding. This phenomenon contributes predominantly above 400% strain once the microdomain architecture has largely been disassembled. Large tactoids that are unable to align in the strain direction lead to concentrated tensile stresses between the polymer and filler, instead of desirable shear stresses, resulting in void formation and reduced tensile properties. In severe cases, such as that observed for the composite containing the largest silicate, these voids manifest visually as stress whitening.