The commercial organic-modified clay was incorporated into a nearly amorphous PLA matrix using a melt-blending process to form PLA/clay nanocomposites. The nanocomposite containing 1 phr of clay conferred the highest exfoliation of clay among all investigated clay dosages. Especially, only this particular nanocomposite had a lower modulus and exhibited significant stress-whitening and necking behavior with a large extension, elongation at break being increased to 208%, up to 37-fold increment compared to the neat PLA. Based on SEM and TEM pictures, the highly exfoliated platelets produced a relatively large interfacial area between the clay platelet and PLA matrix, which resulted in a comprehensively plasticized interfacial region. The highly plasticized interfacial region and the well-dispersed clay platelets with high aspect ratio, particular for thin samples, enhanced the multiple shear-banding which induced the plastic deformation and substantial shear yielding behavior. It also caused a decrease in the spherulite nucleation behavior of the PLA. On the contrary, when the clay was added at higher amounts, it existed mostly in the form of intercalated structure which acted as rigid filler, raising the modulus and causing an early failure in the tensile test. Both Halpin–Tsai and Mori–Tanaka equations were used to predict the modulus of the nanocomposites at higher clay contents where the Mori–Tanaka equation gave a better prediction.