Thermal degradation of PMMA nanocomposites with functionalized nanoparticles as filler material is studied. Nanocomposites of PMMA with oleic acid (OA) functionalized LaF3: Nd3+ nanoparticles (OA-NPs, 2–3 nm) were prepared by solvent mixing and casting method. Minimal loss of optical transparency observed in nanocomposites was attributed to good dispersion of OA-NPs in PMMA matrix. Further thermogravimetric analysis (TGA) of PMMA, OA-PMMA and OA-NP/PMMA nanocomposites were carried out in nitrogen atmosphere and three degradation steps were observed. Evolved products during the thermal degradation of PMMA, OA-PMMA and NC-25 (nanocomposites with 25 wt% of OA-NPs) were analyzed by mass spectroscopy. Delayed evolution of radicals and MMA (methyl methacrylate) at third degradation step was observed in OA-PMMA film and NC-25. Differing to PMMA and OA-PMMA, evolved gas mass spectrum of NC-25 did not show presence of methoxy radicals and monomer at first and second step of degradation. The glass transition studies revealed the increase in glass transition temperature with nanoparticle concentration. This was attributed to the physical interaction of PMMA chains with OA-NPs and formation of interface region of low mobile PMMA chains around OA-NPs. Hence the improvement in the stability of OA-NP/PMMA was attributed to the formation of low mobile PMMA chains around nanoparticles. Display omitted •Thermal degradation of PMMA nanocomposites having oleic acid functionalized LaF3: Nd3+ nanoparticles as filler is studied.•Nanocomposites were transparent and NIR luminescent.•The improvement in the thermal stability was attributed to the low mobile polymer interface region around nanoparticles.