The typical process used to synthesize water expandable polystyrene (WEPS) was modified and applied to prepare water expandable polystyrene (PS)-clay nanocomposites (WEPSCN). The natural clay can be uniformly dispersed in water due to its hydrophilicity. It can be further carried into the styrene monomer by the formation of water-in-oil inverse emulsion. Via suspension polymerization, spherical PS beads with myriads of water/clay droplets inside were obtained. Upon heating via the hot medium, the PS matrix was expanded to form a cellular structure. Transmission electron microscopy results indicated that nanoclay forms a layer around the cell wall. The presence of nanoclay led to higher water content in the beads and reduced the water loss during storage. Using CO2 as the co-blowing agent, foams with a bi-model structure and lower densities were obtained. Furthermore, CO2 foaming offers an alternative method to utilize dried WEPS/WEPSCN beads. The presence of water cavities significantly enlarges the cell size and leads to a foam product with ultra-low density (similar to 0.03 g/cc) and low thermal conductivity. (c) 2006 Elsevier Ltd. All rights reserved.