It is thought that high-dielectric constant, suitable conductivity, and dielectric loss dominate electrorheological (ER) effects. According to this viewpoint, the polyaniline/montmorillonite nanocomposite (PANI-MMT) particles with high-dielectric constant and suitable conductivity were synthesized by an emulsion intercalation method. The electrorheological properties of the suspensions of PANI-MMT particles in silicone oil have been investigated under direct current electric fields. At room temperature, it was found that the yield stress of PANI-MMT ER fluid was 7.19 kPa in 3 kV/mm, which is much higher than that of pure polyaniline (PANI), that of pure montmorillonite (MMT) as well as that of the mixture of polyaniline with clay (PANI+MMT). In the range of 10–100 °C, the yield stress changed only 6.5% with the variation of temperature. The sedimentation ratio of PANI-MMT ERF was about 98% after 60 days. The structure of PANI-MMT particles was characterized by infrared, x-ray diffraction (XRD), and transmission electron microscopy (TEM) spectrometry, respectively. The XRD spectra show that the inner layer distance of PANI-MMT can be enhanced to 1.52 nm when the PANI was inserted into the interlayer of MMT, whereas it is only 0.96 nm for free MMT. TEM shows that the diameter of PANI-MMT particles is about 100 nm. The dielectric constant of PANI-MMT nanocomposite was increased 5.5 times that of PANI and 2.7 times that of MMT, besides, the conductivity of PANI-MMT particle was increased about 8.5 times that of PANI at 1000 Hz. Meanwhile, the dielectric loss tangent can also be increased about 1.7 times that of PANI. It is apparent that the notable ER effect of PANI-MMT ER fluid was attributed to the prominent dielectric property of the polyaniline-montmorillonite nanocomposite particles.