Composite materials of polylactide (PLA) have been a popular environmentally-friendly and low-cost bio-composite that is used for packaging applications. Clay has been used as fillers to improve the mechanical properties of PLA and enhance the gas permeation properties of the composites. However, adding unmodified clay to PLA leads to a reduction in its tensile strength and elongation at break, due to its incompatibility with PLA. In this study, Montmorillonite clay was modified with highly-positive charged quaternized chitosan (QC) by a solution mixing process. The modification efficiency was evaluated through the change in d-spacing values of the clays by X-ray diffraction spectroscopy. Fourier transform infrared (FTIR) spectroscopy was used to study the changes in the structures of the clays. QC with 50 % DQ at 10 % concentration, 2.5 % solid content, 1,000 rpm of stirring speed, and by ultra-sonication (70 % amplitude in 15 min) were observed as the optimum conditions to modify Montmorillonite. The d-spacing value increased from 12.4 Å to 20.3 Å, after the modification, which is comparable to the 18.2 Å of commercial Cloisite 30B. The modified clays were then mixed with PLA to generate bio-composite materials. The results show that adding the modified clays (at up to 5 wt%) leads to a slight reduction in tensile strength and modulus, but a modest increase in the elongation at break of the material, compared to neat PLA. Tensile strength, strain, modulus, and elongation at break of the bio-composite are 41.60 ± 2.06 (MPa), 2.97 ± 0.15 (%), 1,740 ± 140 (MPa), and 3.00 ± 0.16 (%), in comparison with 46.20 ± 4.04 (MPa), 2.67 ± 0.26 (%), 2,015 ± 301 (MPa), and 2.79 ± 1.28 (%) for neat PLA. Moreover, the bio-composite shows an impact strength improvement of about 20 %, compared to neat PLA. Hence, QC can be applied as a promising agent to modify Montmorillonite clay for preparing bio-composites. These composites can maintain high mechanical properties and degradability with an improvement in impact strength are suitable for packaging applications.