A novel organic montmorillonite, which could act as both polycondensation catalyst of poly(ethylene terephthalate) (PET) and filler of PET/clay nanocomposites, was prepared. Original montmorillonite was first treated with different amounts of poly(vinylpyrrolidone) (PVP), and then intercalated by TiO2/SiO2 Sol to gain polycondensation catalytic activity. The acquired clay possessed excellent thermal stability and would not degrade during the polycondensation step. PET/clay nanocomposites were prepared via in-situ polymerization using the organo-clay as polycondensation catalysts. The morphologies of the nanocomposites were characterized by X-ray diffraction and transmission electron microscope. The results indicated that the amount of PVP and TiO2/SiO2 Sol strongly affected the dispersion state of the clay, and finally, partially exfoliated PET/clay nanocomposites were obtained. The nanocomposites had better properties than pure PET due to the incorporation of the delaminated clay layers. POLYM. ENG. SCI., 49:1562-1572, 2009. (C) 2009 Society of Plastics Engineers