Elastomer toughened nanocomposites consisting of Poly(butylene terephthalate) (PBT), glycidyl methacrylate grafted ultra low density polyethylene (ULDPE-g-GMA), and organoclay (Cloisite 30B) were prepared by melt blending using microcompounder followed by injection molding. ULDPE-g-GMA was used as an impact modifier. The content of ULDPE-g-GMA was kept constant at 2wt% while OMMT at 3wt% and 5wt% has been used. The obtained nanocomposites were analyzed by XRD, polarizing optical microscopy (POM) and izod impact test. We have investigated the effect of organoclay inclusion on the impact strength and morphology of PBT molecules in the nanocomposites.