Nanocomposites of polylactide (PLA) with aluminum hydroxide (ATH), short carbon fibers (CF), and montmorillonite (MMT) were prepared via direct melt blending. The exfoliated and intercalated clay structures with some aggregations in the PLA matrix were observed. The tensile strength and elongation at break of the PLA composite caused by the high content of the retardant ATH were improved by adding modified MMT and CF to replace a portion of ATH in the PLA matrix. The thermal degradation temperatures and char residue of the PLA/ATH/MMT/CF nanocomposites as determined by thermogravimetric analysis were higher than without MMT. Furthermore, a novel method was proposed to analyze the flammability of composite using an infrared camera, which could capture the apparent thermal image of the sample during UL 94 V test. It was found that, with addition of the MMT and short CF, a more effective insulation layer could be formed on the ablating surface of the PLA/ATH composite, and the high thermal conductivity of the CF might increase the release rate of heat from the surface composite during burn, thus the PLA/ATH/MMT nanocomposite containing short carbon fibers having a V-0 rating without flaming dripping could be obtained.