A series of poly(ethylene terephthalate) (PET)/phosphonium vermiculite (P-VMT) composites were prepared by a melt-blending method, and we investigated the morphology and thermal and mechanical properties of the composites. We prepared P-VMT with quaternary phosphonium salts using the common method followed by a cation-exchange reaction. X-ray diffraction showed that the phosphonium surfactants were partially intercalated into the vermiculite layers, The d-spacing of the PETclay sample was somewhat less than that of the P-VMT because some degradation of the surfactant took place during melt processing. Compared with PET, the PETclay composites had a lower decomposition temperature and showed a 17.4% increase in the tensile strength with a P-VMT content of 3 wt %. Scanning electron microscopy and transmission electron microscopy demonstrated that P-VMT had a homogeneous dispersion and good compatibility in the polymer matrix with a low content of additive and indicated that the P-VMT content of 3 wt % was optimal. (C) 2012 Wiley Periodicals, Inc. J Appl Polym Sci, 2012