Polyurethane (PU) nanocomposite films containing highly-aligned graphene sheets are produced. Aqueous dispersion of ultralarge-size graphene oxide (GO) is in situ reduced in waterborne polyurethane, resulting in fine dispersion and high degree of orientation of graphene sheets, especially at high graphene contents. The PU/reduced GO nanocomposites present remarkable 21- and 9-fold increases in tensile modulus and strength, respectively, with 3 wt.% graphene content. The agreement between the experiments and theoretical predictions for tensile modulus proves that the graphene sheets are indeed dispersed individually on the molecular scale and oriented in the polymer matrix to form a layered structure. The moisture permeability of the nanocomposites presents a systematic decrease with increasing graphene content, clearly indicating the impermeable graphene sheets acting as moisture barrier. The synergy arising from the very high aspect ratio and horizontal alignment of the graphene sheets is responsible for this finding.