Although there are many works published on shape memory polyurethanes, but no report is found on PCL-based polyurethane composite using PCL with molecular weight of 2000 g/mol and nanoclay particles via in-situ polymerization. In this work, we try to approach some problems concerning the chemical structure, dispersion of nanoparticles in the matrix and interaction between nanoparticles and polymer in shape memory of PCL (Mn=2000 g/mol) -based polyurethane/nanoclay composites. While PCL (Mn=2000 g/mol) polyurethane constituted the soft segments, MDI/BD formed the hard segments. The weight ratio of soft to hard segments was found to be 65/35. Composites were synthesized in presence 1 and 3 wt% of nanoclay (Cloisite®30B) via in-situ polymerization by a twostep method. Effect of nano particles on their interactions with polyurethane chains, crystallinity, mechanical properties and shape memory have been investigated using FTIR, DSC, tensile test and shape memory analysis, respectively. Phase mixing and hydrogen bonding intensified with 1 wt% nanoclay particles, whereas 3 wt% nanoclay led to phase separation. XRD, MTDSC, AFM analyses showed exfoliation of samples with 1 wt% nanoclay in the matrix and better tensile strength in comparison with pure sample and higher shape recovery compared to all other samples. Crystallinity of soft segments resulted in higher modulus and improvement of shape memory. TGA results showed a three-step degradation mechanism for PCL, MDI and BDO-based polyurethane.