An in situ semibatch polymerization process for making phenolic resin/montmorillonite clay nanocomposites is developed. It is found that auxiliary mixing in phenol allows intercalation of the monomer and polymer between montmorillonite clay layers. At 2.7%, clay by mass the montmorillonite is predominantly exfoliated (fully dispersed). At higher clay loading, a substantial amount of the clay remains in aggregate or intercalated form. When the montmorillonite is exfoliated, the material is mechanically superior. The composite has a tensile modulus that is 21% higher than the neat resin and has 87% improved fracture strength, 100% larger fracture energy, and strain to failure 13% above the pure resin. Thermogravimetric analysis shows the montmorillonite system maintains its thermal stability up to 200degreesC. (C) 2005 Wiley Periodicals, Inc.