Dispersion of graphite in water was achieved using clay as dispersing aid. In the absence of polymer, the clay/graphite suspensions were sufficiently stable to produce aerogels composed of very thin layers of uniformly dispersed nanoparticles. Poly(vinyl alcohol) (PVOH) aerogels containing binary nanofillers (clay plus graphite) were then fabricated and tested. These composites were found to maintain low thermal and electrical conductivities even with high loading of graphite. A unique compressive stress-strain behavior was observed for the aerogel, exhibiting a plateau in the densification region, likely due to sliding between clay and graphite layers within the PVOH matrix. The aerogels containing only graphite exhibited higher compressive modulus, yield stress and toughness values than the samples filled with binary nanofillers. X-ray diffraction (XRD) spectra for the same composite aerogel before and after compression testing illustrated the compression-induced dispersion changes of nanofillers. Composites containing 50 wt % graphite demonstrated a downshift of its 2D Raman peak implying graphite exfoliation to graphene with less than 5 layers.