Composites with excellent water-induced shape-memory effects (SMEs) were successfully synthesized by first using clay as the SME-activating phase and thermoplastic polyurethane (TPU) as the matrix. Naturally abundant clay was grafted with poly(methacrylic acid) (PMAA) to improve particle interactions, which allowed for the formation of strong percolation networks in the composites, determined by swelling tests and dynamic mechanical analysis in combination with theoretical modeling. This led to significant improvements of the polymer modulus and high water absorptions, causing reversible modulus changes of up to 30 times from the wet to the dry condition. The results from cyclic wetting-drying-stretching tests showed the TPU-clay composite containing 10.4 vol % PMAA-grafted clay exhibited the best SMEs among the composites investigated, with the shape fixity and shape recovery ratios being 82% and 91%, respectively. Besides SMEs, these new polymer-clay composites were also pH-sensitive and mechanically adaptive upon exposure to water. (c) 2013 Wiley Periodicals, Inc. J. Polym. Sci., Part B: Polym. Phys. 2013, 51, 1513-1522