In this study, melt intercalation method is applied to prepare poly(lactic acid) (PLA) and poly(ethylene glycol) (PEG)-plasticized PLA nanocomposite films including 0, 3, and 5% organoclay (Cloisite 30B) using a laboratory scale compounder, which is connected to a microcast film device. To evaluate the nanomorphology and the dispersion state of the clays, X-ray diffraction (XRD) and transmission electron microscopy (TEM) are conducted. Tensile tests are performed to characterize the mechanical behavior of the films. Biodegradation rate is determined by degradation tests in cornposting medium. Differential scanning calorimeter (DSC) is applied to observe the thermal behavior of the films. XRD and TEM show that the exfoliation predominantly occurrs in plasticized PLA nanocomposites, whereas unexfoliated agglomerates together with exfoliated clays are observed in the nonplasticized PLA. Tensile tests indicate that the addition of 3% clay to the neat-PLA does not affect the strength; however, it enhances the modulus of the nanocomposites in comparison to neat-PLA. Incorporation of 3% clay to the plasticized PLA improves the modulus with respect to PLA/PEG; on the other hand, the strain at break value is lowered similar to 40%. The increase in the rate of biodegradation in composting medium is found as in the order of PLA > PLA/PEG > 3% Clay/PLA/PEG > 5%, Clay/PLA/PEG > 3% Clay/PLA. DSC analysis shows that the addition of 3% clay to the neat PLA results in an increase in T-g. The addition of 20% PEG as a plasticizer to the neat-PLA decreases T-g about 30 degrees C, however incorporation of clays increases T-g by 4 degrees C for the plasticized PLA. (C) 2009 Wiley Periodicals, Inc. J Appl Polym Sci 114: 2481-2487, 2009