Colloid prepared with epoxidized soybean oil (ESO) and a nanoclay, organically modified montmorillonite (OMMT), has been processed using an ultrasonic twin-screw extruder under various ultrasonic amplitudes and screw rotation speeds. Ultrasonic treatment has significantly increased OMMT dispersion in ESO, according to wide angle X-ray diffraction and rheological data. Yield stress, storage and loss modulus, and complex viscosity and relaxation time of the colloid have been increased with increase of ultrasonic amplitude. Under certain high ultrasonic amplitudes, the increase of one to two orders of magnitude in the above-mentioned properties of colloids has been observed. Creep and recoverable compliance have been decreased with the increase of ultrasonic amplitude. The tremendous changes in rheological properties of the colloid are a result of significantly improved OMMT dispersion with the aid of ultrasonic treatment. With no or low ultrasonic treatment, a higher screw rotation speed has improved OMMT dispersion since it brings more mixing effect. However, at high ultrasonic amplitudes, a higher rotation disrupts jet flow and has led to less dispersion improvement compared with the same colloid extruded at a lower rotation speed. Colloids extruded at 400 rpm were cured using triethylenetetramine to prepare bio-based nanocomposites. The nanocomposite prepared using colloid treated at 13 mu m shows improved tensile strength and modulus compared with the nanocomposite prepared using untreated colloid.