A novel cyclic initiator was synthesized from dibutyl tin(IV) oxide and hydroxyl-functionalized multiwalled carbon nanotubes (MWNTs) and was used to initiate the ring-opening polymerization of cyclic butylene terephthalate oligomers to prepare poly(butylene terephthalate) (PBT)/MWNT nanocomposites. The results of Fourier transform infrared and NMR spectroscopy confirmed that a graft structure of PBT on the MWNTs was formed during the in situ polymerization; this structure acted as an in situ compatibilizer in the nanocomposites. The PBT covalently attached to the MWNT surface enhanced the interface adhesion between the MWNTs and PBT matrix and, thus, improved the compatibility. The morphologies of the nanocomposites were observed by field emission scanning electron microscopy and transmission electron microscopy, which showed that the nanotubes were homogeneously dispersed in the PBT matrix when the MWNT content was lower than 0.75 wt %. Differential scanning calorimetry and thermogravimetric analysis were used to investigate the thermal properties of the nanocomposites. The results indicate that the MWNTs acted as nucleation sites in the matrix, and the efficiency of nucleation was closely related to the dispersion of the MWNTs in the matrix. Additionally, the thermal stability of PBT was improved by the addition of the MWNTs. (C) 2010 Wiley Periodicals, Inc. J Appl Polym Sci 118: 2929-2938, 2010