Diglycidyl ether of bisphenol A type epoxy resin-polyether polyol-organically treated montmorillonite ternary nanocomposites were synthesized in this study. The effects of addition of polyether polyol as an impact modifier on morphological, thermal and mechanical properties of nanocomposites were investigated by X-ray diffraction, scanning electron microscopy (SENI), differential scanning calorimetry, impact and tensile testing. The results showed that organically treated montmorillonite is intercalated by epoxy, since the interlayer spacing expanded from 1.83 to 3.82 nm upon nanocomposite synthesis. The addition of polyether polyol impact modifier had no effect on the interlayer spacing. SEM examination showed that polyol forms an immiscible phase in the epoxy matrix. Thermal characterization of nanocomposites indicated an increase in T-g with respect to both polyether polyol and montmorillonite contents. The impact strength of the samples with no clay was improved approximately 160% upon adding 7 wt% polyether polyol. In polyether polyol modified nanocomposites, the impact and tensile strengths decreased with respect to increasing amount of montmorillonite and showed a maximum with respect to the polyether polyol content at constant clay loading. The Young's modulus of the nanocomposites exhibited an increase with respect to the montmorillonite loading and showed a maximum with respect to the polyol content at each clay loading. (C) 2003 Elsevier Ltd. All rights reserved.