Intercalated/exfoliated nanocomposites of thermoplastic polyolefin (TPO) blended nanoclay (Cloisite 20 A and Cloisite 30B) were fabricated using melt extrusion process. Polypropylene grafted maleic anhydride (PP-g-MA) was used as a compatibiliser to improve the dispersibility of clay. TPO/nanoclay composites were prepared with different percentages of clay loading (3, 5 and 7 wt%) by adding PP-g-MA as a compatibiliser. The nanocomposites having 5 wt%C20A/5 wt% compatibiliser exhibited a remarkable improvement in mechanical (tensile modulus, flexural modulus and impact strength) and thermal (heat distortion temperature, HDT) properties. The thermal measurements have been carried out by differential scanning calorimetry, thermogravimetric analysis and HDT methods. Dynamic mechanical analysis studies indicated that PP macromolecules were intercalated or exfoliated between the interlayer of silicates. The morphology of nanocomposites was characterised by scanning electron microscopy (SEM) and X-ray diffraction (XRD) was used to find out the arrangement of crystals in the nanocomposites. The SEM and XRD clearly demonstrated the progressive break up of particles and results in decreased particle size with the optimised combination.