Nanoclay filled thermoplastic polyurethane (TPU)/polypropylene (PP) blends compatibilized with maleic anhydride grafted polypropylene (MA-g-PP) have been studied with emphasis on sequence of nanoclay addition. In sequence I [TPU(nano)/PP/MA-g-PP], nanoclay was first added to TPU and this nano composite was blended with PP, using MA-g-PP as compatibilizer. In the case of sequence II [TPU/PP(nano)/MA-g-PP], nanoclay was added first to PP and blended with TPU, using MA-g-PP as compatibilizer. These blend systems were evaluated by DSC, FTIR, DMA, SEM, XRD and tensile properties. The results indicated that sequence I imparted greater compatibility to the polymers and better nanoclay dispersion than sequence II. Overall the TPU(nano)/PP/MA-g-PP blend system shows better dispersion than TPU/PP(nano)/MA-g-PP.