Physical properties, such as gas permeability, tensile modulus, and dispersion behavior of nanopowder in linear low density polyethylene/ montmorillonite nanocomposite were investigated as a function of compatibilizer and processing conditions. Nanocomposites were prepared using twin screw extruder and internal mixer under various processing conditions. XRD and TEM were used to evaluate the degree of intercalation/exfoliation of montmorillonite. Significant changes of dispersion behavior of montmorillonite and physical properties were observed depending on the processing conditions and concentration of compatibilizer.