Microgel-clay composite particles were prepared by one-step surfactant free precipitation polymerization. Laponite nanoparticles present in the reaction mixture become encapsulated during the microgel formation process. Microgel clay composites based on poly(N-vinylcaprolactam-co-acetoacetoxyethyl methacrylate) containing different amount of incorporated clay nanoparticles were synthesized. The clay content was varied from 2 wt% to 18 wt%. The extremely high incorporation efficiency of the clay nanoparticles into microgels was detected. The size of the hybrid microgels was decreased from 700 nm to 100 nm by increase of the clay concentration in the reaction mixture. Obtained hybrid microgels exhibit negative surface charge and excellent colloidal stability. Microgel clay composite particles display temperature-sensitive behaviour in water. The swelling degree of the hybrid microgels decreases with increase of the clay loading. Microgel-clay composite particles exhibit temperature-controlled uptake of the cationic dye, Methylene blue, and can be used as scavenger systems in aqueous media. (C) 2010 Elsevier Ltd. All rights reserved.