Chitosan/montmorillonite nanocomposites can impart water vapor and oxygen barrier and antimicrobial properties to paper. However, this application is limited by the low water-solubility of chitosan. Carboxymethylation can increase the water-solubility of chitosan. In this work, carboxymethyl chitosan was synthesized by grafting with chloroacetic acid, and intercalated montmorillonite nanocomposites were prepared by intercalation of carboxymethyl chitosan with sodium-based montmorillonite. The process conditions were optimized for the fabrication of nanocomposites. Characterizations were conducted by FT-IR, 1H-NMR and XRD. FT-IR and 1H-NMR results showed that carboxyl groups were introduced into the chitosan, and carboxymethyl chitosan was generated. XRD results confirmed the insertion of CM-CTS into interlayers of Na+-MMT. As indicated from XRD results, chemical modification of chitosan resulted in enhanced intercalation. Carboxymethyl chitosan resulted in formation of exfoliated chitosan/montmorillonite nanocomposites.