ABSTRACTGraphene oxide and furfuryl alcohol modified graphene nanosheets (G‐FA) were used to prepare graphene/novolak composites. Effect of graphene compatibilization on the properties of the composites especially carbon yield value is evaluated. Both types of graphene nanosheets were dispersed uniquely in the novolak matrix as proved by X‐ray diffraction analysis. However, modification of graphene sheets by furfuryl alcohol results in more improved dispersions. Thermogravimetric analysis confirms the elevated thermal stability of the nanocomposites in comparison with the neat novolak. In addition, G‐FA containing composites have higher carbon yield values. A shift in the wave number of characteristic bonds of graphene after oxidation and modification with furfuryl alcohol, OH, CO, and CO bonds, are seen in the Fourier transform infrared spectroscopy spectra. Raman results and scanning electron microscopy images show that graphene nanosheets reduced in size and wrinkled by oxidation and functionalization. Transmission electron microscopy image of the composite with 0.2 wt % of G‐FA reveals the presence of nanosheets with curvature. © 2013 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2014, 131, 40273.