Organoclays have wide spread application in environmental remediation and nanocomposites synthesis. Some of the quaternary ammonium compounds (QACs) commonly used to prepare organoclays are toxic to biota. However, information on the toxicity of organoclays is rarely available in the literature. This study assessed the toxicity of three laboratory prepared bentonite organoclays on the soil microbially mediated processes (such as dehydrogenase activity and potential nitrification) and soil inhabiting animals, such as earthworms. Toxicity to both microbial processes and earthworm followed the order: hexadecyltrimethyl ammonium modified bentonite > octadecyltrimethyl ammonium modified bentonite > arquad modified bentonite > unmodified bentonite. The organoclays were able to cause slight improvement (up to 25%) in the potential nitrification in some soils when they were added at low application rates up to 5%, but caused reduction (3–86%) in the dehydrogenase activity in all the soils irrespective of loading rates. The organoclays were extremely toxic to the survival and vigour of the earthworms. The average body weight loss of the worms reached as high as 62% in hexadecyltrimethyl ammonium modified bentonite treated soil even at 1% loading. This study holds utmost importance in assessing the toxicity of organoclays to soil microbially mediated processes and earthworms.