In the present study, noncovalently functionalized tungsten disulfide (WS) nanosheets were used as a toughening agent for epoxy nanocomposites. WS was modified with branched polyethyleneimine (PEI) to increase the degree of interaction of nanosheets with the epoxy matrix and prevent restacking and agglomeration of the sheets in the epoxy matrix. The functionalization of WS sheets was confirmed through Fourier transform infrared spectroscopy and thermogravimetric analysis. The exfoliation of the bulk WS was confirmed through X-ray diffraction and various microscopic techniques. Epoxy nanocomposites containing up to 1 wt % of WS-PEI nanosheets were fabricated. They showed a remarkable improvement in fracture toughness (K). K increased from 0.94 to 1.72 MPa m for WS-PEI nanosheet loadings as low as 0.25 wt %. Compressive and flexural properties also showed a significant improvement as incorporation of 0.25 wt % of WS-PEI nanosheets resulted in 43 and 65% increase in the compressive and flexural strengths of epoxy nanocomposites, respectively, compared with neat epoxy. Thermal stability and thermomechanical properties of the WS-PEI-modified epoxy also showed a significant improvement. The simultaneous improvement in the mechanical and thermal properties could be attributed to the good dispersion of WS-PEI nanosheets in the matrix, intrinsic high strength and thermal properties of the nanosheets, and improved interaction of the WS nanosheets with the epoxy matrix owing to the presence of PEI molecules on the surface of the WS nanosheets.