The effect of incorporation of montmorillonite layered silicate (MLS) on poly (ethylene terephthalate) (PET) matrix was investigated. MLS was added in varying concentration of 1 to 5 weight percent in the PET matrix. DSC and polarized optical microscopy were used to determine the crystallization effects of MLS addition. Non isothermal crystallization kinetics showed that the melting temperature and crystallization temperature decrease as the MLS percent increases. This delayed crystallization along with the irregular spherulitic shape indicates hindered crystallization in the presence of MLS platelets. The influence of this morphology was related with the fracture toughness of PET nanocomposites using essential work of fracture coupled with the infra red (IR) thermography. Both the essential as well as non essential work of fracture decreased on addition of MLS with nanocomposite showing reduced toughness.