Poly [styrene‐b‐(ethylene‐co‐butylene)‐b‐styrene] (SEBS)/sepiolite clay nanocomposites are prepared by solvent casting method. Two types of schemes have been adopted to establish the compatibility between nonpolar polymer (SEBS) and needle‐like inorganic filler (sepiolite), either by polar modification of the nonpolar polymer or organic modification of the inorganic filler. Structure–property correlation of nanocomposites derived from two different approaches is compared. Structural and morphological analysis of nanocomposites has been investigated by Fourier transform infrared spectroscopy, X‐ray diffraction, field emission scanning electron microscopy and transmission electron microscopy. Fourier transform infrared result shows better compatibility between SEBS and modified sepiolite clay compared to maleic anhydride grafted SEBS and pristine sepiolite in their nanocomposites. Tensile strength and % elongation are found to increase by 32 and 105%, respectively, with the addition of just 3 parts per hundred parts of resin (phr) modified sepiolite clay to pristine SEBS matrix. Moreover, thermal stability has also improved by 96°C with similar loading. This work provides a new insight into the structure and thermo‐mechanical properties of novel SEBS–sepiolite clay nanocomposites. Copyright © 2017 John Wiley & Sons, Ltd.