Hydrophilic bentonite and organo-montmorillonite (OMMT) have been modified by using a vegetable oil based amido-amine compound. The modified nanoclays were characterized by using X-ray diffraction (XRD) and FTIR techniques. Increase in the basal spacing after the modification was observed in both the cases. Further, Mesua ferrea L. seed oil based sulfonated epoxy resin nanocomposites have been prepared by using these modified nanoclays [3 (w/w) of clay in each case]. The XRD, TEM, SEM, FTIR, and rheological studies confirmed the formation of partially exfoliated nanocomposites. The study also confirmed that hydrophilic bentonite is not suitable nanofiller for the system, though modified bentonite slightly improves the performance characteristics of the pristine polymer. Modified OMMT based nanocomposite shows significant improvement in tensile strength (similar to 1.7 times), scratch hardness (similar to 2 times), gloss (14 units), and thermal stability (18 degrees C) compared to the pristine system. This nanocomposite also exhibit better performance than OMMT based analogous nanocomposite. (C) 2011 Wiley Periodicals, Inc. J Appl Polym Sci, 2012