Nanocomposites based on biodegradable poly(butylene adipate-co-terephthalate) (PBAT) and layered silicates were prepared by the melt intercalation method. Nonmodified montmorillonite (MMT) and organo-modified MMTs (DA-M, ODA-M, and LEA-M) by the protonated ammonium cations of dodecylamine, octadecylamine, and N-lauryidiethanolamine, respectively, were used as the layered silicates. The comparison of interlayer spacing between clay and PBAT composites with inorganic content 3 wt% measured by X-ray diffraction (XRD) revealed the formation of intercalated nanocomposites in DA-M and LEA-M. In case of PBAT/ODA-M (3 wt%), no clear peak related to interlayer spacing was observed. From morphological studies using transmission electron microscopy, the ODA-M was found to be finely and homogeneously dispersed in the matrix polymer, indicating the formation of exfoliated nanocomposite. When ODA-M content was increased, the XRD peak related to intercalated clay increased. Although the exfoliated ODA-M (3 wt%) nanocomposite showed a lower tensile modulus than the intercalated DA-M and LEA-M (3 wt%) composites, the PBAT/ODA-M composite with inorganic content 5 wt% showed the highest tensile modulus, strength, and elongation at break among the PBAT composites with inorganic content 5 wt%. Their tensile properties are discussed in relation to the degree of crystallinity of the injection molded samples. (C) 2004 Wiley Periodicals, Inc.