Biodegradable composites comprising of modified starch and modified nanoclay have been prepared. Starch has been modified by esterification and subsequently crosslinked. The thermal, mechanical, and biodegradation characteristics of the composites have been investigated. The compressive properties of the composites with the addition of nanoclay were twice that of crosslinked starch phthalate without addition of nanoclay. Predictive theories were used to analyze the obtained experimental results. SEM studies on fracture morphology indicated quasi-brittle fracture. Flexural properties showed considerable improvement due to nanoclay addition. The water uptake increased up to 6% nanoclay, beyond which the uptake decreased. Biodegradation studies showed an initial time lag prior to the onset of degradation.