Saturated polyester resin, derived from the glycolysis of polyethyleneterephthalate (PET) was examined as an effective way for PET recycling. The glycolyzed PET (GPET) was reacted with the mixture of phthalic anhydride and ethylene glycol (EG) with varied compositions and their reaction kinetic were studied. During polyesterification of GPET, acid and EG, the parameters like degree of polymerization (DP n), extent of reaction (p) acid value and hydroxyl values were measured. The thermomechanical properties and the morphologies of the saturated polyester nanocomposites were examined by using a differential scanning calorimetry (DSC), dynamic mechanical analysis (DMA), wide angle X-ray diffraction (WAXRD) and transmission electron spectroscopy (TEM). There were significant differences observed in T g , T m and T c before and after addition of GPET and clay content. Nanocomposites with lower content of organoclay showed intercalated morphology while by increasing the amount of organoclay, the exfoliated morphology was more prevalent. Water vapour transmission (WVT) was determined for saturated polyester nanocomposite sheets according to ASTM E96-80.