Thermoplastic polyurethane (TPU) elastomer is used as an encapsulant in undersea sonar devices. A new material for sonar encapsulant exhibiting better mechanical strength than TPU along with a lower swelling ratio for seawater and oil is required to prolong its application. TPU grafted silica nanoparticles (TPU-g-silica) were prepared and then they were melt mixed with TPU to fabricate desirable composites for underwater applications. The composite containing silica nanoparticles exhibited better tensile strength and lower swelling ratios in the seawater and oil than TPU regardless of the surface treatment of the silica particles. At fixed silica content in the composite, the TPU/TPU-g-silica composite exhibited better tensile strength and lower swelling ratio than the TPU composite with the pristine silica particles. Furthermore, the TPU/TPU-g-silica composite exhibited enhanced tensile strength as compared to TPU after being impregnated with oil.