Poly(ethylene terephthalate) (PET)/polyhedral oligomeric silsesquioxane (POSS) nanocomposites were prepared by in situ polymerization. Light scattering measurement suggested that there is significant change in molecular weight arising from gel formation by chemical crosslinking during polymerization. The thermal decomposition temperatures of the composites measured at 5 wt % weight loss were 5-10 degrees C higher than that of PET. There is no significant change in other thermal properties. Scanning electron microscopy observations suggest that there is obvious phase separation in PET/POSS composites, composites containing 1 wt % of disilanolisobutyl and trisilanolisobytyl-POSS show fine dispersions of POSS (30-40 nm in diameter), which arise from strong interfacial interactions between POSS and PET during polymerization. The viscosity of the composites increased with the addition of POSS. The observation of a plateau region of composites containing I wt % of POSS in the plot of log G' vs. log G" indicates strong interfacial interactions between POSS and PET. Sixty-three percent and 41% increase in tensile strength and 300 and 380% increase in modulus were achieved in the composites containing 1 wt % of disilanol- and trisilanol-POSS, respectively. (C) 2007 Wiley Periodicals, Inc.