Nanocomposite films were prepared by blending poly(amic acid)(PAA), poly(o-hydroxyamide)( PHA) and organically modified montmorillonite (OMMT) that has a layered structure. XRD, SEM and TEM were used to study the morphology of PAA/PHA nanocomposites, and DMA, TGA, UTM, LOI and PCFC techniques were used to characterize the mechanical and thermal properties, and flame retardancy of the nanocomposites. TEM images revealed that OMMT layers were well dispersed in the PAA/PHA matrix and showed exfoliation and intercalation behavior. The addition of 3 wt% OMMT to the PAA/PHA blend increased the initial modulus of PAA/ PHA blend to 3.68 GPa that was ca. 48% higher than that of the control PAA/PHA blend. Above 4 wt%, however, both the initial modulus and the tensile strength were found to decrease, which might be due to the aggregation of OMMT in PAA/PHA matrix. When the OMMT content was below 3 wt%, the thermal stability and flame retardancy of the PAA/PHA nanocomposites increased with increasing OMMT content.