A polymerizable cationic surfactant, vinylbenzyldimethyldodecylammonium chloride (VDAC) was synthesized for functionalization of montmorillonite (MMT) and preparation of exfoliated polystyrene-clay nanocomposites. Organophilic MMT was prepared by cationic exchange between inorganic ions of MMT and ammonium cations of VDAC in an aqueous medium. Dispersions of intercalated clay (VDAC-MMT) in styrene monomer formed gels. Shear thinning behavior of the gels was observed via rheological measurements. Polystyrene-clay nanocomposites were prepared by free radical polymerization of styrene containing dispersed organophilic MMT. Exfoliation of MMT in polystyrene matrix was achieved as revealed by X-ray diffraction (XRD) and transmission electron microscopy (TEM). The exfoliated nanocomposites have higher dynamic modulus and higher decomposition temperature than pure polystyrene.