Mechanical properties and deformation mechanism of polypropylene (PP) filled with different weight percentage of ethylene–octene copolymer (EOC) and fibrillar silicate attapulgite (ATP) clay were investigated under uniaxial cyclic loading at constant crosshead speed to evaluate plasticity/damage coupling behavior. With increasing EOC and clay content, PP exhibited typical plastics response with marked stress drop at yield followed by steady state plastics region up to rupture. The addition of 3 wt% ATP clay to the PP/EOC blend shows enhanced impact strength up to four times compared to PP with decrease in yield strength by 24% implied synergistic toughening effect. Volume strain, which characterizes deformation damage, steadily increased over the whole plastics stage up to 5.2 for axial strain of 0.30 after a critical tensile strain of 0.05. The small energy value observed for large volume strain revealed matrix shear deformation as the controlling factor for energy dissipation without crazing. Fractography observation using scanning electron microscopy revealed formation of debonding and cavitations on the surface of PP matrix, contributing increase in the volume of all compositions.