In this work, silane‐grafted high‐density polyethylene was prepared by reactive extrusion. This product and neat high‐density polyethylene were then melt‐compounded with organically modified montmorillonite to form nanocomposites. A series of tests, including Fourier transform infrared spectroscopy, small‐angle X‐ray diffraction, and transmission electron microscopy, were done on the specimens to investigate the grafting efficiency and its compatibilizing effect and the microstructure of the samples. In addition, the thermal, rheological, and barrier properties were examined to study of the grafting effects and nanocomposite characteristics. The results indicate that an intercalated structure could be easily obtained in the nanocomposites with a grafted matrix. A significant reduction in the degree of crystallinity and an increased crystallization temperature with grafting and the incorporation of nanoclay were proven by thermal analysis (differential scanning calorimetry), whereas the melting temperature did not change noticeably. Dynamic rheological testing indicated the disappearance of the Newtonian plateau and solidlike behavior of the nanocomposites based on grafted polyethylene in lower frequencies. Furthermore, the oxygen transfer rate of the samples decreased significantly with the incorporation of nanoclay in the grafted matrix and the moisture crosslinking of the samples. © 2012 Wiley Periodicals, Inc. J Appl Polym Sci, 2012