Epoxy/clay nanocomposites were prepared by swelling organoclay in an epoxy resin, diglycidyl ether of bisphenol A, followed by curing with an aromatic hardener, diethyltoluenediamine. A combination of X-ray diffraction with transmission electron microscopy showed the coexistence of intercalated and exfoliated clay morphologies throughout the matrix. In addition, a microscopic and homogeneous dispersion of clay agglomerations, with sizes ranging from about 2 to 5 mum, was revealed by optical microscopy. Dynamic mechanical analysis indicated a steady increase in storage modulus and a gradual decrease in high glass-transition temperature as the clay loading increased. The fracture toughness of the nanocomposites significantly increased with increasing clay concentration, suggesting a toughening effect from the clay particles. Scanning electron microscopy and optical microscopy observations of the epoxy/clay nanocomposites suggested that shear yielding of the matrix, crack deflection, voiding, and debonding of clay particles and epoxy matrix are among the operative toughening mechanisms observed.