Aqueous polyurethane dispersion was synthesized using phosphorus compound which received significant attention for the replacement of halogenated flame retardants. In this study, polyols which have phosphorus moity in their structural unit were synthesized by two-step polycondensation reaction using dimethyl phenylphosphonate, ethylene glycols. adipic acid, and 1,4-butanediol. In the next step, polyurethane dispersion was prepared using these polyols, isophorone diisocyanate with dimethyl propionic acid. The particle size of polyurethane latex was reduced from 347 nm to 240 nm with increasing DMPA content. It was observed that the LOI values of prepared coatings increased from 27% to 35% with increasing phosphorus content.