Cyclodextrin-modified montmorillonite (MMT-CD) has been prepared from commercial montmorillonite clay (Closite 30B) containing two hydroxyl groups by reacting succinic anhydride through esterification. Poly(epsilon caprolactone) (PCL)/clay nanocomposites are prepared by host-guest chemistry between MMT-CD as host and PCL, hydrophobic polymer as guest. The structures of the intermediates and final nanocomposite are investigated in detail by FT-IR XRD, TEM, DSC and TGA measurements. The intercalated/exfoliated morphologies are determined by combined XRD and TEM analyses. Thermal stabilities of all nanocomposites are improved by the addition of MMT-CD compared to the neat polymer. The DSC data confirm that the crystallinity of PCL is slightly increased by increasing clay loading. © 2015 Elsevier Ltd. All rights reserved.