Bagasse whiskers isolated from bleached bagasse pulp were chemically modified with n‐octadecyl isocyanate in the presence of dibutyltin dilaurate as a catalyst. The modified cellulose whiskers were used in ratios from 2.5 to 15% with polycaprolactone (PCL) polymer to prepare nanocomposite films by a solution/casting technique. The prepared nanocomposites were characterized with regard to their biodegradability in soil and moisture‐barrier, moisture sorption, mechanical, thermal, and thermomechanical properties. The use of the modified cellulose whiskers resulted in improvements in the moisture‐barrier, biodisintegration, and tensile properties of PCL. The nanocomposites containing different modified whisker loadings had very low moisture absorption (1.88–2.49%) after 4 weeks of exposure to 75% relative humidity, but these values were slightly higher than that of neat PCL (1.79%). Modified whiskers in the PCL matrix did not noticeably affect the glass‐transition and melting temperatures of PCL. © 2012 Wiley Periodicals, Inc. J Appl Polym Sci, 2012