A poly(ethylene terephthalate)/clay nanocomposite (PET/clay) was prepared via in situ polymerization, in which the clay was modified with 12-aminododecanoic acid (ADA). A compatibilizer containing an amino and an ester group was introduced into the PET/ADA-clay system, which can attach to ADA-clay through ionic interaction and be incorporated into PET chains through transesterification, The compatibilizer-modified ADA-clay was first formed in a pretreatment process and then participated in polymerization. The compatibilizer, as an intermedium between organoclay and polymer, improved clay dispersion in PET matrix. The PET/clay nanocomposite prepared by this novel method possesses significantly higher storage modulus than does neat PET. (c) 2006 Wiley Periodicals, Inc.