Polypropylene (PP) was blended with polycaprolactone (PCL) and nanoclay (NC) in a twin-screw extruder (TSE) using a traditional extrusion process and a sub-critical gas-assisted process (SGAP). SGAP is a new and facile processing method that injects compressed gas (CO2 or N-2) at low pressures (similar to 10 bars) into the barrel of the extruder to induce rapid and repetitive foaming and resolubilization as the melt travels through regions of high pressure and low pressure. Bubble expansion during foaming introduces an equibiaxial elongational flow not otherwise generated in TSE, adding to the total stress the polymer matrix can exert to break up nanoparticle agglomerates and reduce the droplet size of secondary polymers in blends. Impact, morphology, and X-ray diffraction (XRD) properties confirmed a smaller PCL phase droplet size and an increase in dispersion of the NC when SGAP was used. Standard small amplitude oscillatory (SAOS) rheological tests for the storage modulus G ' were not sensitive enough to discern the difference between the traditionally extruded samples and the SGAP samples. However, the zero-strain non-linearity parameter, Q(0), determined by the Fourier-Transform rheology, was able to distinguish the enhanced dispersive and mixing capabilities of SGAP. Practical implications of SGAP and Fourier-Transform (FT) rheology are also discussed in this paper. POLYM. ENG. SCI., 2019. (c) 2019 Society of Plastics Engineers