Clay mineral-containing nanocomposite hydrogels have been proven to have exceptional composition, properties, and applications, and consequently have attracted a significant amount of research effort over the past few years. The objective of this paper is to summarize and evaluate scientific advances in clay mineral-containing nanocomposite hydrogels in terms of their specific preparation, formation mechanisms, properties, and applications, and to identify the prevailing challenges and future directions in the field. The state-of-the-art of existing technologies and insights into the exfoliation of layered clay minerals, in particular montmorillonite and LAPONITE®, are discussed first. The formation and structural characteristics of polymer/clay nanocomposite hydrogels made from in situ free radical polymerization, supramolecular assembly, and freezing-thawing cycles are then examined. Studies indicate that additional hydrogen bonding, electrostatic interactions, coordination bonds, hydrophobic interaction, and even covalent bonds could occur between the clay mineral nanoplatelets and polymer chains, thereby leading to the formation of unique three-dimensional networks. Accordingly, the hydrogels exhibit exceptional optical and mechanical properties, swelling-deswelling behavior, and stimuli-responsiveness, reflecting the remarkable effects of clay minerals. With the pivotal roles of clay minerals in clay mineral-containing nanocomposite hydrogels, the nanocomposite hydrogels possess great potential as superabsorbents, drug vehicles, tissue scaffolds, wound dressing, and biosensors. Future studies should lay emphasis on the formation mechanisms with in-depth insights into interfacial interactions, the tactical functionalization of clay minerals and polymers for desired properties, and expanding of their applications.