Rubber-toughened poly(trimethylene terephthalate) (PTT)-organoclay nanocomposite (RTPTTCN) was prepared by a melt mixing technique. The rubber-toughened PTT (RTPTT) was made by blending it with ethylene propylene diene terpolymer (EPDM) and with a small amount of maleated EPDM as a compatibilizer. XRD and TEM analysis indicated that the RTPTTCN forms a partially exfoliated nanocomposite. It was observed from SEM analysis that the clay nanoparticles induced a reduction of rubber particle size in the PTT matrix. Tensile and dynamic mechanical analysis indicated that the clay nanoparticles enhance the stiffness of the RTPTT without adversely affecting its toughness. Melt rheological studies revealed that the nanocomposites exhibited strong shear thinning behavior, and a percolated network of the clay particles was formed. It was also observed from DSC that the clay nanoparticles caused an increase in the nonisothermal crystallization temperature of the PTT.