The present study is aimed to prepare hybrid materials by incorporating layered silicates and microcrystalline cellulose into thermoplastic polymer. Using ethylene-propylene (EP) copolymer as thermoplastic polymer matrix and maleated EP (MEP) copolymer as compatibilizer, three types of composites were prepared by (i) melt mixing of cellulose with thermoplastics [I], (ii) melt mixing of clay with thermoplastics [II], and (iii) melt mixing of cellulose with the thermoplastic clay nanocomposites [III]. They were characterized by X-ray diffractometry (XRD), differential scanning calorimetry, thermogravimetric analysis, and Fourier transform infrared spectroscopy. Instron was used to measure [II] and [III] that contain layered silicates were intercalated nanocomposites as confirmed by XRD and transmission electron microscopy. The improvement in tensile properties was observed in cellulose-fiber-reinforced composites with increasing cellulose content. In nanocomposites [II] and [III], the tensile modulus was improved. The resistance of the cellulose composites [I] for water absorption decreased with increasing content of cellulose fibers. The incorporation of layered silicates reduced the water absorption of cellulose composites. (c) 2007 Wiley Periodicals, Inc.