Despite great recent progress with carbon nanotubes and other nanoscale fillers, the development of strong, durable, and cost-efficient multifunctional nanocomposite materials has yet to be achieved. The challenges are to achieve molecule-level dispersion and maximum interfacial interaction between the nanofiller and the matrix at low loading. Here, the preparation of poly(vinyl alcohol) (PVA) nanocomposites with graphene oxide (GO) using a simple water solution processing method is reported. Efficient load transfer is found between the nanofiller graphene and matrix PVA and the mechanical properties of the graphene-based nanocomposite with molecule-level dispersion are significantly improved. A 76% increase in tensile strength and a 62% improvement of Young's modulus are achieved by addition of only 0.7 wt% of GO. The experimentally determined Young's modulus is in excellent agreement with theoretical simulation.