Water-assisted extrusion process has been used to successfully prepare polypropylene (PP)/clay nanocomposites with high degree of clay delamination and markedly improved theological, thermal and mechanical properties. PP-graft-maleic anhydride (PP-g-MA)-based nanocomposites and masterbatches were synthesized from untreated clay and organoclay, respectively, and fully characterized. The effects of using high-shear rates and water injection during the melt-compounding were examined. A mechanism explaining the formation of such nanocomposites is then proposed. The best clay dispersion and properties improvements of PP-g-MA/organoclay nanocomposites and masterbatches were obtained using high-shear rates and water injection (synergy effect). PP-based nanocomposites were then synthesized by dilution of PP-g-MA-based masterbatches into neat PP. For comparison, nanocomposites were also prepared by a one-pot process where PP. PP-g-MA and organoclay are directly melt-blended with or without water injection. The nanocomposites prepared by dilution into PP of a masterbatch prepared through water-assisted extrusion showed the highest clay dispersion and consequently the best thermal, mechanical and theological properties. (C) 2010 Elsevier Ltd. All rights reserved.