Although smectite clays have gained much interest in recent years as potential sustained local drug delivery vehicles, they have not been yet utilized or assessed as a local drug delivery device for treatment of periodontal disease. In this paper we showed that unique nanostructure and gel-formation ability of clay holds great promise as an effective drug carrier. In particular, we demonstrated the feasibility of using laponite XLG, a smectite clay, as a carrier for in situ delivery of tetracycline that can potentially be used in the treatment and prevention of periodontal disease. The intercalation of tetracycline between the layers of laponite at different acidic pHs and different concentrations of tetracycline was examined. The laponite–tetracycline composite was characterized using X-ray diffraction (XRD), Fourier transformed infrared spectroscopy (FT-IR) and differential thermal analysis (DTA). The results showed that, in a pH and concentration dependent manner, tetracycline can be intercalated between the layers of laponite nanoparticles. The release study in a simulated saliva solution demonstrated a sustained release of tetracycline from laponite over a 72 hour period. The antimicrobial activity of the released tetracycline was maintained and was not affected by the intercalation of tetracycline into the carrier (laponite) and its release from the carrier.