Millable polyurethane (MPU) rubber nanocomposites were prepared on a two-roll mill and molded on a compression molding machine. The amount of loading of Mg(OH)2 nanoparticles (nMg(OH)2) was from 0.5 to 2.5 wt% followed by the addition of dicumyl peroxide (as a curing agent). The compounded matter was subjected to compression molding so as to get a cure sheet (130 × 130 × 3 mm). Mechanical (tensile strength, elongation at break (%) and abrasion resistance index), physical (hardness and swelling index), and thermal properties (flammability retardency and degradation stability) were studied. The extent of dispersion of nMg(OH)2 particles was studied using scanning electron microscope and atomic force microscope. nMg(OH)2 was synthesized using continuous ultrasonic cavitation technique. The size and shape of nMg(OH)2 was confirmed using X-ray diffraction and transmission electron microscopy, which was found to be ∼20–60 nm with quasi shape. MPU:nMg(OH)2 nanocomposites show improved mechanical, physical, and thermal properties compared to pristine MPU. This improvement was due to very fine grain size of nMg(OH)2, which facilitates uniform dispersion of nMg(OH)2 within MPU rubber matrix. However, higher loading of nMg(OH)2 shows marginal decrement in properties due to agglomeration, especially at 2.5 wt%.