Well-dispersed starch–clay nanocomposites were prepared by adding a dilute clay dispersion to a solution of starch followed by coprecipitation in ethanol. The clay didn’t significantly influence the type of crystalline structure of starch molecules although the amount of crystallinity appears to be somewhat lower in the nanocomposites. The nanocomposites show improved modulus and strength without a decrease in elongation at break. The increase in modulus and strength is 65% and 30%, respectively for the nanocomposite containing 5 wt.% clay compared to the unfilled starch materials. Further increases in clay result in deterioration in properties most likely due to poorer clay dispersion and lower polymer crystallinity. As the amount of water increases, the modulus of both pure starch and starch nanocomposites decreases, although the change is less pronounced in the nanocomposites suggesting that the addition of clay to form nanocomposites can improve the stability of starch-based products during transportation and storage.