The toughening of polypropylene [PP] with styrene-butadiene-styrene rubber [SBS]/montmorillonite [MMT] nanocomposites was investigated with respect to morphological, thermal, and mechanical properties. The MMT/SBS nanocomposites were prepared in an internal mixer, using an epoxidized SBS [SBSe] to investigate its effect as a compatibilizer. The MMT/SBS nanocomposite was added to PP up to 10 wt%, aiming at material toughening. Transmission electron microscopy (TEM) revealed MMT induced dispersed-phase reductions when compared to typical PP/SBS blends. In addition, changes in the PP crystallization process were observed in the presence of the nanocomposite. Surprisingly, the use of nanofiller, combined with SBSe compatibilizer agent, increased the PP impact strength by about 60%, with no reduction in the tensile module.