Ethylene‐octene elastomer (POE)/organo‐montmorillonite (OMT) and maleic anhydride‐grafted POE (POE‐g‐MAH)/OMT composites were prepared through melt mixing and influence of clay dispersion on thermal, dynamic mechanical, and flammability properties were investigated. The results showed that OMT forms intercalated/exfoliated structures in POE‐g‐MAH/OMT and agglomerated structure in POE/OMT microcomposites, resulting in more significant improvements of storage modulus and glass transition temperature in the POE‐g‐MAH/OMT rather than the POE/OMT composites. The POE‐g‐MAH/OMT nanocomposites have better thermal stability and significantly reduced flammability than the POE/OMT microcomposites, which was discussed on the basis of cone colorimeter test of the composites and energy dispersive X‐ray spectrum analysis of the combustion chars. POLYM. ENG. SCI., 54:2911–2917, 2014. © 2014 Society of Plastics Engineers