In the present investigation, recycled polypropylene (rPP) used as a matrix was modified by incorporating nanofillers through melt blending technique to prepare a masterbatch of nanocomposites. Untreated sisal fibre and mercerised sisal fibres were further incorporated into the nanocomposites for the preparation of bionanocomposites. Bionanocomposites containing 40 wt% of UT fibre and 5 wt% of MA-g-PP revealed an increase in the tensile strength and modulus to the tune of 27% and 370%, respectively, compared to rPP. The flexural strength and modulus also increased to the tune of 129% and 269%, respectively, compared to rPP. Further, the surface treatment of the fibre slightly increased the mechanical properties and stiffness of bionanocomposites. Interfacial strength between fibre and matrix was also evaluated by using Turcsanyi and SatoÀFurukawa models. Damage tolerance of rPP nanocomposites and its bionanocomposites was evaluated using single-edge-notch specimens. The notch length 'a' to width 'W' ratios, a/W, were chosen as 0.3, 0.45 and 0.6. The nanocomposites showed better damage tolerance as compared to the rPP matrix. The corrugated structure with increased fractured surface area was observed in scanning electron microscopy. Better dispersion of clay in the nanocomposites was observed in transmission electron microscopy.