Impact-modified polypropylene (PP)/vermiculite (VMT) nanocomposites toughened with maleated styrene-ethylene butylene-styrene (SEBS-g-MA) were compounded in a twin-screw extruder and injection-molded. VMT was treated with maleic anhydride, which acted both as a compatibilizer for the polymeric matrices and as a swelling agent for VMT in the nanocomposites. The effects of the impact modifier on the morphology and the impact, static, and dynamic mechanical properties of the PP/VMT nanocomposites were investigated. Transmission electron microscopy revealed that an exfoliated VMT silicate layer structure was formed in ternary (PP-SEBS-g-MA)/VMT nanocomposites. Tensile tests showed that the styrene-ethylene butylene-styrene additions improved the tensile ductility of the (PP-SEBS-g-MA)/VMT ternary nanocomposites at the expense of their tensile stiffness and strength. Moreover, Izod impact measurements indicated that the SEBS-g-MA addition led to a significant improvement in the impact strength of the nanocomposites. The SEBS-g-MA elastomer was found to be very effective at converting brittle PP/VMT organoclay composites into tough nanocomposites. (C) 2003 Wiley Periodicals, Inc.