Polyurethane(PU) nanocomposites were prepared using high shear mixing from castor oil, 4,4'-diphenylmethane diisocyanate, and modified clay (Closite 30B) as filler. The synthesis was carried out in bulk and without catalyst in the presence of clay. The clay percentage was varied from 1% to 5% by weight of the nanocomposite. The prepared nanocomposites were characterized using transmission electron microscopy (TEM), scanning electron microscopy, wide angle X-ray diffraction (WAXD), Fourier transform infrared (FTIR) spectroscopy, mechanical and water absorption properties. TEM and WAXD results confirmed exfoliation upto 3% clay in the nanocomposite. Hydrogen bonding between clay and PU matrix was reflected in FTIR. The Young’s modulus improved more than 300% with addition of 4% clay but decreased further due to clay aggregation. The diffusivity and permeability decreased significantly for nanocomposites due to tortuous path offered by exfoliated clay platelets to diffusing water molecules.