Technical Abstract: Montmorillonite clay treated with neopentyl (diallyl)oxy tri( dioctyl) pyrophosphato-titanate was used as a reinforcement for toughened bacterial bioplastic, Polyhydroxybutyrate (PHB) in order to develop novel biodegradable nanocomposites. The modified clay, PHB, toughening partner and specific compatibilizer were processed by extrusion followed by injection molding. Different microscopy and goniometry techniques, rheology analysis, X-ray diffraction and thermo-mechanical testing were used to characterize the nanocomposites. Results showed that the nanocomposites with 5 wt % titanate-modified clay loading exhibited about 400% improvement in impact properties and 40% reduction in modulus in comparison with virgin PHB. The novel aspect of the titanate-based modification was that the nanocomposites still maintained nearly the same impact strength value as that of toughened PHB. The diffraction patterns suggest exfoliation of the organically modified clays and this was further supported by transmission electron microscopy and melt rheological analysis. The mechanical properties of the nanocomposites were correlated with a modified Halpin- Tsai theoretical model and the predictions matched significantly with the experimental results. Toughened and compatibilized PHB showed significantly lower biodegradation rate than virgin PHB and most significantly the addition of the titanate-modified clay in the same formulation enhanced the biodegradation several fold.