In recent years, shape memory polyurethanes have gained substantial attention and are targeted for a range of smart and functional materials. In this work, the development of nanocrystalline celluloses (CNCs) enabled polycaprolactone-based shape memory polyurethane biocomposite using an in situ one-pot reactions is reported. The incorporation of up to 10 wt% CNCs resulted in a remarkable enhancement in the tensile strength at yield (from 0.2 MPa to 7.2 MPa), tensile strength at break (167% improvement), and modulus of elasticity (from 3.5 to 139.3 MPa) while maintaining the elongation at break. This was attributed to the simultaneous action of CNCs as a nucleating agent for crystallization and highly compatibilized reinforcing agent of the network. Moreover, the in situ incorporation of CNCs enhanced the shape memory capability of polyurethanes, which enables its employment in functional material applications, such as the biomedical sector. The intimate interfacial adhesion between the CNCs and the polymer matrix, which promoted shape fixating and recovery, was confirmed by fractured surface morphology studies. Rheology characterizations provided strong evidence that the addition of CNCs increased the shape fixity attributed to the stiffness of CNCs below the glass transition temperature (Tg) compared to the neat PU in conjuncture with the higher Tg of CNCs. Overall, the developed polymer nanocomposites are appealing materials for biomedical applications.