The incorporation of nanoparticles in polymer matrices leads to improvements in several physical properties. As a result, nanocomposites have the potential to be used in various fields such as medical devices, automotive and aerospace applications, packaging, and building materials. This article attempts to describe the various types of nanoparticles and polymeric systems that have been involved in nanocomposite production. Particular emphasis is placed on polymer‐clay nanocomposites, their properties, and the issues related to their production. Thermoplastic, thermoset, biopolymer, and rubber matrices are considered. The effects of nanoclay particles on the physical properties is reported, with due consideration to rheology, mechanical, thermal, barrier and electrical properties, and crystalline morphology. Thermodynamic aspects influencing nanocomposite synthesis, deagglomeration‐delamination of nanoclay and surface energy considerations are discussed. Successful nanocomposite synthesis leading to desirable performance characteristics requires uniform nanoparticle distribution and acceptable levels of exfoliation and/or intercalation of clay, in addition to good interfacial adhesion at the polymer‐clay interface.