Cathode materials that have high reversible magnesium-ion capacities and reasonable operating voltages are needed for rechargeable magnesium batteries. Layered materials are a particularly promising class of materials for electrochemical Mg-ion charge storage, however additional research is needed to increase Mg-ion capacities, improve capacity retension upon cycling, and understand the nature of interlayer interactions. Our work has investigated hydrated vanadium pentoxide (V₂O₅) xerogels that incorporate poly(ethylene oxide) (PEO) between the layers as an approach to improve Mg-ion charge storage and control interlayer structure and dynamics. V₂O₅ nanosheets were grown in the presence of PEO to allow inimate interaction with the V₂O₅ layers and allow control of the PEO content in V₂O₅-PEO nanocomposites. X-ray diffraction and high resolution transmission electron microscopy demonstrate that the interlayer spacing between V₂O₅ layers was increased by incorporating PEO within the layers. The Mg-ion diffusion coefficient was shown to be strongly dependent on not only interlayer spacing, but also interlayer composition. With specific polymer compositions, Mg-ion diffusion within V₂O₅-PEO nanocomposites was significantly increased compared with V₂O₅ xerogels. Raman spectroscopy supports that the polymer interacts with the V₂O₅ lattice resulting in interlayer water that is less strongly bound to the V₂O₅ lattice. The V₂O₅-PEO nanocomposite with specific PEO compositions exhibited significantly improved Mg-ion specific capacity compared with V₂O₅ xerogels and showed improved capacity retension upon cycling. Our work supports that in addition to interlayer spacing, controlling interlayer interactions between V₂O₅ layers, PEO, H₂O, and Mg-ions allows significant improvements in Mg-ion charge transport and storage. The design of layered materials with controlled interlayer compositions provides a novel route to significantly improve charge storage and transport in layered materials.