Composites of paracetamol loaded poly(ethylene glycol) (PEG) with a naturally derived and partially synthetic layered silicate (nanoclay) were prepared using hot-melt extrusion. The extent of dispersion and distribution of the paracetamol and nanoclay in the PEG matrix was examined using a combination of field emission scanning electron microscopy (FESEM), high resolution transmission electron microscopy (HRTEM) and wide-angle X-ray diffraction (WAXD). The paracetamol polymorph was shown to be well dispersed in the PEG matrix and the nanocomposite to have a predominately intercalated and partially exfoliated morphology. The form 1 monoclinic polymorph of the paracetamol was unaltered after the melt mixing process. The crystalline behaviour of the PEG on addition of both paracetamol and nanoclay was investigated using differential scanning calorimetry (DSC) and polarised hot-stage optical microscopy. The crystalline content of PEG decreased by up to 20% when both drug and nanoclay were melt blended with PEG, but the average PEG spherulite size increased by a factor of 4. The time taken for 100% release of paracetamol from the PEG matrix and corresponding diffusion coefficients were significantly retarded on addition of low loadings of both naturally occurring and partially synthetic nanoclays. The dispersed layered silicate platelets encase the paracetamol molecules, retarding diffusion and altering the dissolution behaviour of the drug molecule in the PEG matrix.