To improve the physical properties of plasticized poly(vinyl chloride) (p‐PVC), the p‐PVC nanocomposites filled with four loading levels (3, 5, 7, and 9 parts per hundred of PVC resin) of either nanosized titanium dioxide (nTiO2) or poly(methyl methacrylate)–encapsulated nTiO2 (PMMA‐nTiO2) were prepared by melt mixing on a two‐roll mill, followed by compression molding. The PMMA‐nTiO2 used in this study was synthesized via in situ differential microemulsion polymerization. The resulting PMMA‐nTiO2 exhibited core‐shell morphology (nTiO2 core and PMMA shell) with an average diameter of 42.6 nm. The effects of nTiO2 and PMMA‐nTiO2 on the tensile properties, hardness, morphology, and thermal stability of the as‐prepared p‐PVC nanocomposites were then investigated and compared. The inclusion of either nTiO2 or PMMA‐nTiO2 nanoparticles increased the tensile strength, Young's modulus, hardness, and thermal stability of the nanocomposites in a dose‐dependent manner and reduced the elongation at break. However, the elongation at break was still higher than that for the neat p‐PVC. Moreover, the PMMA‐nTiO2 nanocomposites had a higher enhancement of the tensile strength, Young's modulus, hardness, and thermal stability than the nTiO2 nanocomposites at a similar loading level. Hence, the PMMA grafted on the nTiO2 surface played an important role in toughening and increasing the thermal stability of the nanocomposites owing to the improved miscibility and interfacial adhesion between the encapsulated nanofiller and PVC matrix. J. VINYL ADDIT. TECHNOL., 22:433–440, 2016. © 2015 Society of Plastics Engineers