Several strategies have been developed in the past two decades to increase the mechanical performance of the hydrogels, and to generate self-healing function within the polymer network. Here, we combine two of these strategies to create hydrophobically modified nanocomposite (NC) hydrogels with high mechanical strength and self-healing efficiency. The hydrogels were prepared by in situ copolymerization of N,N-dimethylacrylamide and n-octadecyl acrylate (C18A) in the presence of 2 w/v % Laponite clay nanoparticles in an aqueous solution of worm-like sodium dodecyl sulfate micelles. Incorporation of hydrophobic C18A segments into the gel network significantly increases both the storage and loss moduli of NC hydrogels indicating increasing elasticity and energy dissipation. An improvement in the mechanical performance and self-recoverability of NC hydrogels was also observed after hydrophobic modification. The compressive fracture stress and Young's modulus increase with increasing amount of C18A, and they become 9 +/- 1 MPa and 30 +/- 2 kPa, respectively, at 4 mol % C18A. Incorporation of hydrophobic segments also provides a larger energy dissipation under large strain as compared to the traditional NC hydrogels providing a self-healing efficiency of 90 +/- 10% in mechanically strong NC hydrogels. (c) 2019 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2019, 137, 48853.