Nanocomposites based on biodegradable poly(butylene adipate‐co‐terephthalate) (PBAT) and layered silicates were prepared by the melt intercalation method. Nonmodified montmorillonite (MMT) and organo‐modified MMTs (DA‐M, ODA‐M, and LEA‐M) by the protonated ammonium cations of dodecylamine, octadecylamine, and N‐lauryldiethanolamine, respectively, were used as the layered silicates. The comparison of interlayer spacing between clay and PBAT composites with inorganic content 3 wt % measured by X‐ray diffraction (XRD) revealed the formation of intercalated nanocomposites in DA‐M and LEA‐M. In case of PBAT/ODA‐M (3 wt %), no clear peak related to interlayer spacing was observed. From morphological studies using transmission electron microscopy, the ODA‐M was found to be finely and homogeneously dispersed in the matrix polymer, indicating the formation of exfoliated nanocomposite. When ODA‐M content was increased, the XRD peak related to intercalated clay increased. Although the exfoliated ODA‐M (3 wt %) nanocomposite showed a lower tensile modulus than the intercalated DA‐M and LEA‐M (3 wt %) composites, the PBAT/ODA‐M composite with inorganic content 5 wt % showed the highest tensile modulus, strength, and elongation at break among the PBAT composites with inorganic content 5 wt %. Their tensile properties are discussed in relation to the degree of crystallinity of the injection molded samples. © 2004 Wiley Periodicals, Inc. J Appl Polym Sci 95: 386–392, 2005