Polymer nanocomposites based on the thermoplastic polyurethane (TPU) and organically modified montmorillonite (OMMT) was prepared by melt intercalation technique using a laboratory internal batch mixer followed by compression molding. Varying amount of organically modified nanoclays (1, 3, 5, 7, and 9 wt%) was added to the TPU matrix to examine the influence of organoclay on nanophase morphology and structure-property relationships. The interaction between TPU matrix and nanofiller was studied by infrared spectroscopy. The morphology of nanocomposites was studied by X-ray diffraction, transmission electron microscopy, and atomic force microscopy that shows melt mixing by a batch mixer is an effective method for dispersing OMMT throughout the TPU matrix. Thermogravimetric analysis revealed that incorporation of organoclay enhances the thermal stability of the nanocomposites significantly. Differential scanning calorimetry was employed to measure the melting point and glass transition temperature (T-g) of soft segments. The reinforcing effect of the organoclay was determined by dynamic mechanical analysis and physico-mechanical testing. The effects of nanoclay concentration and processing parameters on the dynamic viscoelastic properties of the nanocomposites were studied by a rubber process analyzer using frequency sweep. A significant increase in the viscosity and storage modulus of the nanocomposites was found with the increasing clay content. POLYM. ENG. SCI., 50:484-498, 2010. (C) 2009 Society of Plastics Engineers