Poly(butylene terephthalate) (PBT)/clay nanocomposites have been prepared by melt intercalation method directly from pristine montmorillonite (MMT), using cetyl pyridinium chloride (CPC) as the polymer/clay reactive compatibilizer. The effect of the reactive compatibilizer (CPC) proportion relative to the clay on the structure and properties of the PBT/clay nanocomposites was studied by XRD, TEM, TGA and cone calorimeter. The results show that such appropriate proportion as 1 wt % CPC to 3 wt % MMT induces well-dispersed intercalated morphology and better thermal and flame retarded properties. At last the intercalation mechanism of the technology was discussed.