In order to eliminate the harm of formaldehyde from panels bonded with UF resin to environment and human health at the source, the low volatile and nontoxic aldehyde of glyoxyal (G) was chosen to react with urea (U) to prepare the wood adhesive of urea-glyoxal (UG) resin a substitute for urea-formaldehyde (UF) resin. The urea-glyoxal (UG) resin was synthesized under weak acid conditions, and its different properties were measured. Also, the effect of nanoclay on physico-chemical, thermal and mechanical properties of UG resin was investigated. For this purpose, the prepared UG resin was mixed with 1, 2 and 3 wt% nanoclay by mechanically stirring for 5 min at room temperature. The physico-chemical properties (such as SPG, viscosity, solid content and gelation time) and dry shear strength of the prepared resin were measured according to standard methods. Also, the effect of nanoclay on curing temperature of UG resin was analyzed by Differential Scanning Calorimetry (DSC) device. The physico-chemical test results indicated that addition of nanoclay increased SPG, viscosity and solid content of UG resin and decreased gelation time in the prepared resin. Dry shear strength test results showed that increasing nanoclay content from 1 to 3 wt% increased shear strength of UG resin; as the panels containing 3% nanoclay exhibited the highest shear strength value and wood failure percentage. Based on DSC test results, hardening rate as well as enthalpy value of the prepared UG resin was decreased by addition of nanoclay.