Mechanically reinforced and thermally enhanced smectite/epoxy nanocomposites were synthesized using "direct" (without solvent) and "solvent" processing techniques. The molecular dispersion of smectite clay in the epoxy resin was investigated for its role in the rheology, structure formation, and properties of nanocomposites. The effects of three typed of organic modifiers on the dispersion structure were compared. The use of solvent during processing assists in the enhancement of clay exfoliation. Rheology was used as a method to compare the degree of clay delamination in the re;,in matrix, as well as to estimate the suspension structure. The critical volume fraction (Phi*) and maximal packaging of smectites were determined and used for prediction of the viscosity. The qualitative changes in the nanostructure of suspensions above Phi*, due to flocculation of exfoliated clay layers, were compared with the alteration of the properties of nanocomposites, related to the structure formation and morphology. The curing kinetics were found to depend on both the organic modifier and solvent, but the extent of curing was roughly equivalent for the pure epoxy resin and the nanocomposites. The structure of the nanocomposites, either intercalated or exfoliated, produced by the direct processing technique was controlled by the organic modifier. By using solvent processing, the effect of the solvent dominates that of the organic modifier, presumably leading to exfoliated nanocomposites. The mechanical and thermal properties are strongly enhanced above the Phi* of smectites, and they are significantly dependent on the type of nanocomposite structure and the use of solvent. (c) 2005 Wiley Periodicals, Inc.