Polymer nanocomposites are recognized as the next generation of polymer composites due to their exceptional properties. Understanding the molecular origin of the reinforcement mechanism is crucial to the development of such promising materials. This paper reports our recent molecular dynamic study on clay-based polyurethane nanocomposites. The effect of clay platelets on phase separation behavior of polyurethane, at the clay-polyurethane interface, is quantified in terms of molecular interactions, structure and dynamics. The results show that the nanoconfinement of polyurethane chains in clay gallery impedes the development of phase separation commonly observed in bulk polyurethane. The absence of phase separation of intercalated polyurethane is believed to be related to the competitive interactions among clay platelet, polyurethane and surfactant.