Poly(lactic acid)/2 wt % organomodified montmorillonite (PLA/OMMT) was toughened by an ethylene-methyl acrylate-glycidyl methacrylate (E-MA-GMA) rubber. The ternary nanocomposites were prepared by melt compounding in a twin screw extruder using four different addition protocols of the components of the nanocomposite and varying the rubber content in the range of 5-20 wt %. It was found that both clay dispersion and morphology were influenced by the blending method as detected by X-ray diffraction (XRD) and observed by TEM and scanning electron microscopy (SEM). The XRD results, which were also confirmed by TEM observations, demonstrated that the OMMT dispersed better in PLA than in E-MA-GMA. All formulations exhibited intercalated/partially exfoliated structure with the best clay dispersion achieved when the clay was first mixed with PLA before the rubber was added. According to SEM, the blends were immiscible and exhibited fine dispersion of the rubber in the PLA with differences in the mean particle sizes that depended on the addition order. Balanced stiffness-toughness was observed at 10 wt % rubber content in the compounds without significant sacrifice of the strength. High impact toughness was attained when PLA was first mixed with the clay before the rubber was added, and the highest tensile toughness was obtained when PLA was first compounded with the rubber, and then clay was incorporated into the mixture. Thermal characterization by DSC confirmed the immiscibility of the blends, but in general, the thermal parameters and the degree of crystallinity of the PLA were not affected by the preparation procedure. Both the clay and the rubber decreased the crystallization temperature of the PLA by acting as nucleating agents. (c) 2014 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2015, 132, 41518.