The effect of EPR-g-MA, nanoclay and a combination of the two on phase morphology and properties of (70/30 w/w) nylon6/EPR blends prepared by melt processing technique has been studied. We found that the number average domain diameter (D(n)) of the dispersed EPR phase in the blend decreased in presence of EPR-g-MA, and clay. This observation indicated that nanoclay could be used as an effective compatibilizer in nylon6/EPR blend. X-ray diffraction study and TEM analysis of the blend/clay nanocomposites revealed the delaminated clay morphology and preferential location of the exfoliated clay platelets in nylon6 phase. Thus, selective dispersion of the clay platelets with delaminated morphology in the matrix phase acted as the barrier and thereby prevented the coalescence of dispersed EPR domains during melt processing. However, addition of nanoclay in the blend did not improve the impact property of the blend. Interestingly, the impact strength of the nylon6/EPR/EPR-g-MA/clay blend was much higher than the nylon6/EPR/EPR-g-MA and nylon6/EPR/clay blends at certain compositions with comparable D(n) values. This could be explained by assuming the presence of delaminated clay platelets at the interface, which were stiffer than the polymers. Hence, the bending energy of the interfaces was high.