Organo-Montmorillonite (o-MMT) nanoclay added polybenzoxazine resin (type I composites) were prepared with varying amounts of clay (0, 1, 2, 4 and 6 wt %). Clay dispersion, changes in curing behaviour and thermal stability were assessed in type I composites. Findings from these studies of type I composites were used to understand thermal stability, mechanical, and mass ablation rate behaviour of nanoclay added carbon fiber reinforced polybenzoxazine composites (type II). Interlaminar shear strength and flexural strength of type II composites increase by 25% and 27%, respectively at 2 wt% addition of clay. An oxy-acetylene torch test with a constant heat flux of 125 w/cm2 was used to investigate mass ablation rate of type II composites. The ablation rate has increased as the weight percentage of clay has increased. This is contradicting to type I composites with up to 6 wt% clay and type II composites with up to 4 wt% clay, which have improved thermal stability. The microstructure of the ablated composites was examined using scanning electron microscopy. Increased ablation rates are due to the reaction of charred matrix with nanoclay, which exposes bare fibers to the ablation front, resulting in higher mechanical erosion losses.