An melt-mixing process has been used to prepare Poly(ethylene terephthalate) (PET)/clay nanocomposites with high degree of clay delamination. In this method, steam was fed into a twin-screw extruder (TSE) to reduce the PET molecular weight and to facilitate their diffusion into the gallery spacing of organoclays. Subsequently, the molecular weight (MW) reduction of the PET matrix due to hydrolysis by water was compensated by solid-state polymerization (SSP). The effect of the thermodynamic compatibility of PET and organoclays on the exfoliated microstructure of the nanocomposites was also examined by using three different nanoclays. The dispersion of Cloisite 30B (C30B) in PET was found to be better than that of Nanomer I.28E (I28E) and Cloisite Na+. The effect of feeding rate and consequently residence time on the properties of PET nanocomposites was also investigated. The results reveal more delamination of organoclay platelets in PET-C30B nanocomposites processed at low feeding rate compared to those processed at high feeding rate. Enhanced mechanical and barrier properties were observed in PET nanocomposites after SSP compared to the nanocomposites prepared by conventional meltmixing. (C) 2013 Society of Plastics Engineers