This paper deals with the preparation of nanocomposites using polypropylene (PP)/high-density polyethylene (PE) blend and low-cost nanokaolinite clay by melt compounding in a Thermo Haake Rheocord mixer. The optimization of processing parameters and nanoclay content is done using Box-Behnken design of response surface methodology. Mechanical properties are modeled in terms of processing parameters and nanoclay content and results are verified using statistical analysis. Most reports suggest that kaolinite clay is difficult to disperse in polymer matrix compared to costly montmorillonite clay. This difficulty is overcome by surface modification of nanokaolinite clay by an organic group and the effect of modification is studied using melt flow index, thermal stability and dynamic mechanical behavior. Morphological characterization is done by scanning electron microscopy and X-ray diffraction. Study shows that cheap and abundantly occurring nanokaolinite clay is an efficient reinforcing agent for PP/PE blend. Design of experiments can be effectively used to model such a system, which is influenced by a number of variables. It is also observed that surface modification of the nanoclay with an organic group leads to remarkable improvement in the thermal and mechanical properties of the blend.