The extensive use of non-biodegradable plastic products has resulted in significant environmental problems caused by their accumulation in landfills and their proliferation into water bodies. Biodegradable polymers offer a potential solution to mitigate these issues through the utilization of renewable resources which are abundantly available and biodegradable, making them environmentally friendly. However, biodegradable polymers face challenges such as relatively low mechanical strength and thermal resistance, relatively inferior gas barrier properties, low processability, and economic viability. To overcome these limitations, researchers are investigating the incorporation of nanofillers, specifically bentonite clay, into biodegradable polymeric matrices. Bentonite clay is an aluminum phyllosilicate with interesting properties such as a high cation exchange capacity, a large surface area, and environmental compatibility. However, achieving complete dispersion of nanoclays in polymeric matrices remains a challenge due to these materials’ hydrophilic and hydrophobic nature. Several methods are employed to prepare polymer–clay nanocomposites, including solution casting, melt extrusion, spraying, inkjet printing, and electrospinning. Biodegradable polymeric nanocomposites are versatile and promising in various industrial applications such as electromagnetic shielding, energy storage, electronics, and flexible electronics. Additionally, combining bentonite clay with other fillers such as graphene can significantly reduce production costs compared to the exclusive use of carbon nanotubes or metallic fillers in the matrix. This work reviews the development of bentonite clay-based composites with biodegradable polymers for multifunctional applications. The composition, structure, preparation methods, and characterization techniques of these nanocomposites are discussed, along with the challenges and future directions in this field.