A novel liquid phosphorus-containing polyol named as PDEO was prepared via reactions between ethylene glycol and phenylphosphonic dichloride. PDEO reacts with the -NCO-terminated prepolymers and forms urethane linkages in the chain extension reaction step, thus, it was used to prepare inherently flame-retardant flexible polyurethane foams (FPUFs). The structure and properties of flame-retardant FPUF were characterized by scanning electron microscopy (SEM), tensile measurements, limiting oxygen index (LOI), vertical burning tests, cone calorimeter tests and thermogravimetric analysis (TGA). The vertical burning test demonstrated that fire extinguished instantly after the withdrawn of the pilot flame, while the PDEO loading was only 10 php. In addition, the persistent flame retardancy of PDEO in FPUFs was proved by thermal ageing test. The corresponding flame-retardant mechanism of PDEO-containing FPUFs was investigated by pyrolysis gas chromatography mass spectrometry (Py-GC/MS), X-ray photoelectron spectroscopy (XPS), SEM and FTIR, and the results indicated a gaseous phase dominated flame-retardant mechanism of PDEO.