The concept of conductive network structure in thermoset matrix without sacrificing the inherent mechanical properties of thermoset polymer (e.g., epoxy) is investigated here using "hairy" bentonite fillers. The latter were prepared through the in situ polymerization of aniline in the presence of 4-diphenylamine diazonium (DPA)-modified bentonite (B-DPA) resulting in a highly exfoliated bentonite-DPA/polyaniline (B-DPA/PANI). The nanocomposite filler was mixed with diglycidyl ether of bisphenol A (DGEBA), and the curing agent (4,4'-diaminodiphenylsulfone) (DDS) at high temperature in order to obtain nanocomposites through the conventional melt mixing technique. The role of B-DPA in the modification of the interface between epoxy and B-DPA/polyaniline (B-DPA/PANI) is investigated and compared with the filler B/PANI prepared without any diazonium modification of the bentonite. Synergistic improvement in dielectric properties and mechanical properties points to the fact that the DPA aryl groups from the diazonium precursor significantly modify the interface by acting as an efficient stress transfer medium. In DPA-containing nanocomposites, unique fibril formation was observed on the fracture surface. Moreover, dramatic improvement (210-220%) in fracture toughness of epoxy composite was obtained with B-DPA/PANI filler as compared to the weak improvement of 20-30% noted in the case of the B/PANI filler. This work shows that the DPA diazonium salt has an important effect on the improvement of the interfacial properties and adhesion of DGEBA and clay/PANI nanofillers.