In this study, bulk polymerized clay-tethered thermoplastic polyurethane (TPU) composites were synthesized that offered much improved tensile strength with negligible changes in tensile modulus. These composites contained intercalated, tethered layered silicate particles and were synthesized by mixing low molecular weight prepolymer chains containing unreacted –NCO groups with reactive layered silicate clay followed by catalyzed chain extension reaction with butanediol. The molar ratio of –NCO and –OH functional groups in the composite was varied between 1.0 and 1.2. It was found that an appreciable amount of –NCO groups was consumed in reaction with moisture present in the clay and some in quaternary ammonium ion-catalyzed dimerization and trimerization. Composites with –NCO to –OH molar ratio 1.1 provided the best improvement in mechanical properties—the composite with 5 wt% clay provided a 60% increase in tensile strength and 50% increase in strain at break, while the tensile modulus increased only by 15% over TPU. POLYM. ENG. SCI., 45:1532–1539, 2005. © 2005 Society of Plastics Engineers