The study considers the effects of different dispersion levels of nanoclay on the crosslinking reaction of thermoplastic vulcanizate (TPV) nanocomposites based on polypropylene/ethylene propylene diene M‐class rubber (PP/EPDM). PP nanocomposites with dispersion level ranging from intercalated structures to a mixture of intercalated tactoids and exfoliated layers were used as the thermoplastic phase. Dimethylol phenolic resin or octylphenol‐formaldehyde resin was used as curing agents, along with stannous chloride dihydrate as the catalyst, to vulcanize the rubber phase during the reactive extrusion process. Initially, temperature effects were investigated in internal batch mixer. Subsequently, the effects of screw speed (i.e., shear rate and residence time) were evaluated along the screw length. Different criteria such as nuclear magnetic resonance (NMR) signal line width, bound curative content, and residual diene concentration were used to evaluate the extent of crosslinking, along with normalized storage modulus and gel content. X‐ray diffraction (XRD) analysis and transmission electron microscopy (TEM) micrographs showed that the dynamic vulcanization process improves the dispersion level of nanoclay in the final TPVs. It was found that the presence of nanoclay influences the crosslinking reaction, mainly through its effect on the continuity index of the EPDM phase. POLYM. ENG. SCI., 2012. © 2011 Society of Plastics Engineers