Thermoplastic polyurethane (TPU) nanohybrids have been prepared through melt extrusion using ester type PU and different concentrations of Indian origin organically modified nanoclay as filler. The level of dispersion of nanoclay in TPU is found to be good and considerable intercalation occurs due to strong interaction between polymer matrix and filler. The interaction is shown through spectroscopic measurement from the shifting of peak position in FTIR and UV–vis. absorption spectra. Nanoclay induces crystallization in polymer while the blob size, as measured through small angle neutron scattering, decreases in nanohybrid (1.5 nm) as compared to pure TPU (1.7 nm) obtained after fitting the initial data point to Debye-Bueche model. Mechanical responses are much superior in nanohybrid as compared to pure TPU and stiffness values continue to increase with nanoclay concentration while the toughness reach ata maximum value at an optimum concentration of 4 wt% of nanoclay. Uniaxial stretching lead to the crystallization of segments and ordering of hard segments as verified through sharp melting points in stretched TPU vis-à-vis predominant amorphous nature before stretching. Nanohybrid membranes are prepared to investigate the gas permeation across the membranes and very high gas barrier of nanohybrid (449 Barrer) is found as opposed to pure TPU barrier of 169 Barrer. Critical assessment of permeability is performed in presence of nanoclay in different concentrations with a plausible mechanism of gas barrier.