HDPE/Clay nanocomposites were prepared using laboratory made HDPE grafted maleic anhydride (HDPE-gMA) as a compatibilizer. rheology, morphology, and thermal behavior of nanocomposites were studied. The results showed that increasing the degree of grafted MA increased the intercalation of clay platelets leading to their exfoliation. The presence of free MA enhanced the clay dispersion via regrafting onto PE matrix. Although the presence of antioxidant improved the thermal stability of PE, it decreased the clay dispersion because of inhibition of regrafting of free MAs. The exfoliated nanocomposites exhibited higher viscosity and elasticity than those of intercalated nanocomposites. They displayed viscosity upturn and nonterminal behavior of elasticity at low frequency ranges, representative of the creation of three-dimensional networks via the individual clay platelets and/or chain bridging between the platelets. The presence of such a network was evidenced by tan delta studies. Incorporation of clay remarkably increased the thermal stability of the PE. It was found that the effect of Hofmann elimination reaction can effectively be eliminated using the antioxidant. POLYM. COMPOS., 31:1028-1036, 2010.