Nanoclay reinforced starch‐co‐PAA hybrid nanocomposite thin films are synthesized by in situ polymerization technique in aqueous solution. The interactions of clay with starch‐co‐PAA are studied by Fourier transform infrared spectroscopy (FTIR) and X‐ray diffraction (XRD). The morphology of nanoclay platelets in starch‐co‐PAA hybrid nanocomposite thin film is studied by scanning electron microscope (SEM) and high‐resolution transmission electron microscope (HRTEM) images are used to investigate micro and nanostructural behavior of clay platelets in starch‐co‐PAA matrix. It is noticed that, the thin film has an exfoliated structure at 3 wt% clay loading whereas; clay platelets are agglomerated in higher percentage of clay. The synthesized materials have chemical resistance of 22% more than the virgin matrix. The biodegradable properties of the nanocomposite thin films are reduced by 20% due to incorporation of nanoclay. The oxygen barrier property of starch‐co‐PAA/clay thin film is reduced by seven folds as compared to starch‐co‐PAA. From the measurement of refractive indexes, it is found that, the transparency of the nanocomposite thin films are reduced by around 10% by reinforcement of nanoclay. The results show a substantial enhancement in oxygen barrier property and reduction of refractive index on clay loading, which may permit the synthesized materials suitable for packaging applications. POLYM. COMPOS., 40:229–239, 2019. © 2017 Society of Plastics Engineers