Glutaraldehyde (GA) was investigated as a potential binder material for nanoparticle-modified wood fiber-based composites. Clay nanoparticle wood fiber composites were fabricated using a wet-lay forming process followed by compression molding. GA treatments significantly increased both bending modulus and strength properties of wood fiber composites. Bending modulus and strength of the fiber composites increased from 2.1 GPa and 16.4 MPa without GA treatment to 6.9 GPa and 49.6 MPa, respectively, after GA treatments. Wood modification with GA also substantially decreased water absorbance and thickness swelling of wood fiber composites. Although there was a significant change in performance after crosslinking, only minimal changes were detected in FTIR analysis of the fiber composites. The effect of montmorillonite clay nanoparticles loading onto wood fiber was found to have a deleterious impact on performance of the wood fiber composites. This research suggests that the nanoparticles inhibit wood fiber-fiber interactions resulting in poor interfiber bonding.