In this study chemically surface-modified nanofibrillated cellulose (NFC) was used at low levels (0.5 to 3 wt%) as reinforcement in a polyvinyl alcohol (PVA) matrix. The modified NFC–PVA films prepared by a solution casting technique showed improved mechanical performance and good optical properties. NFC was allylated and further epoxidised with hydrogen peroxide. The addition of 1 wt% epoxy-NFC enhanced the modulus and strength of the pure PVA film, 474% and 224%, respectively. This composite film exhibited visible light transmittance of 83%. The results also showed that 1 wt% epoxy-NFC loading was beneficial to improve the crystallinity of PVA. SEM characterization confirmed better dispersion of modified NFC within the PVA matrix compared to unmodified NFC. The result showed the favourable effect of chemically modified NFC on the mechanical properties of PVA compared to unmodified NFC as reinforcement.