A multigram-scale fabrication method was developed to modify molybdenum disulfide (MoS2) nanosheets with cetyl trimethyl ammonium bromide (CTAB), and the CTAB-modified MoS2 nanosheets (CTAB-MoS2) were applied to improve the properties of polymers. CTAB-MoS2 dispersed well in organic solvents and was incorporated into polystyrene (PS) by a masterbatch-based melt-blending method. The morphology, thermal behavior, fire resistance, and smoke suppression properties of the nanocomposites were studied. The CTAB-MoS2 nanosheets dispersed well in PS and exhibited a partial exfoliation structure. The incorporation of 3 wt% CTAB-MoS2 nanosheets led to an increase in thermal degradation temperature (43–60 °C) and char formation as well as a reduction of the peak heat release rate (PHRR) (20%). Moreover, the addition of CTAB-MoS2 nanosheets significantly decreased the smoke production rate (SPR), the peak specific extinction area (peak-SEA) values (52% reduction), and the gaseous products. The improvements in the thermal stability, fire resistance, and smoke suppression properties of PS nanocomposites were ascribed to good dispersion of modified MoS2 nanosheets, physical barrier effects, and catalytic char function of MoS2 nanosheets.