The addition of small percentages of Na+-montmorillonite (NaMMT) nanoclay appears to improve considerably the performance of thermosetting urea-formaldehyde (UF) resins used as adhesives for plywood and for wood particleboard. X-ray diffraction (XRD) studies indicated that NaMMT loses the periodic atomic structure when mixed in small proportions in the acid-curing environment characteristic of the curing of UF resins. This can be interpreted as becoming exfoliated under such conditions. The partly crystalline structure of the ordered zones of the UF resins is maintained but at a slightly lower level. Differential scanning calorimetry (DSC) indicated that NaMMT has an accelerating effect on the curing of the UF resin. It also appears to lead to a more controlled rate of crosslinking implying a more regular hardened network. The influence of NaMMT addition was particularly noted in plywood by the increase in water resistance of the UF-bonded panel. In the case of wood particleboard even the dry internal bond strength of the panel, a direct indication of the performance of the resin, improved with small additions of NaMMT. A hypothesis and model of the reasons why such improvement to the performance of UF resins by addition of nanoclay should occur has been presented. This is based on the application of percolation theory to the networking capability of the clay nanoplatelets. (c) 2008 Wiley Periodicals, Inc.