Herein, a waterborne polyurethane clearcoat with excellent chemical and physical performance through an encapsulation system has been developed. The encapsulation system in this study incorporated blocked polyisocyanate (b-PIC) as a crosslinker with an acrylic polyol to ensure homogeneous dispersion under water-based conditions. An acrylic polyol was designed to readily disperse into the water phase, fulfill the requirements of a clearcoat, and effectively encapsulate b-PIC. The structure of the core-shell encapsulation system enabled both homogeneous dispersion and close proximity between the acrylic polyol and b-PIC, resulting in a uniform crosslinking clearcoat. Three different clearcoats were prepared: two water-based b-PIC systems with both polyisocyanate encapsulated dispersion (PED) and conventional b-PIC dispersion (CPD) without encapsulation, and a solvent-based (SB) b-PIC dispersion with ethyl cellosolve. Their crosslinking and mechanical properties were characterized. Using dynamic light scattering (DLS), it was confirmed that PED contained synthesized encapsulated particles smaller than 80 nm with a narrow particle size distribution. The cured PED-containing clearcoat exhibited a higher gloss of 73.6 at 20° compared to that of CPD. In addition, the surface mechanical properties of cured PED waterborne clearcoat using pencil hardness, nano-indentation (NI), and micro-scratch testing (MST) were measured. In particular, the PED clearcoat exhibited superb resistance to water penetration, maintaining more than 95 % transmittance using a UV–Vis spectrometer. Finally, the glass transition temperature of PED, CPD, and SB clearcoats was confirmed by dynamic mechanical analysis (DMA) and differential scanning calorimetry (DSC). These indicated that the PED clearcoat system could be utilized in waterborne coatings technology as a useful and inexpensive technology that addresses the need to reduce volatile organic compound (VOC) production for improved environmental protection.