Phosphorylated cardanol prepolymers (PCP) are obtained by simultaneous phosphorylation and oligomerization of cardanol, an unsaturated pentadecylphenol extracted from the nuts of the plant Anacardium occidentale L. Although GPC showed the presence of only oligomeric species in the system, the high viscosity of 0.35–0.45 million cps was found to be due to involvement of hydrogen bonding. IR spectra of PCP gave bands at 1030 and 1240 cm−1, indicating P—O—C linkages. The decrease in iodine value and the absence of vinyl IR bands at 895 and 907 cm−1 indicated oligomerization. NMR spectra of PCP showed partial loss of unsaturation. A carbonium ion initiated mechanism is indicated for the oligomerization. PCP was found to be highly reactive with aldehydes, amines, and isocyanates. Highly insoluble and infusible thermoset products could be obtained. TGA studies showed a two-stage decomposition with improved thermal stability above 500°C for PCP compared to cardanol-formaldehyde (novolac)-type resins. Completely cured PCP was highly resistant to hydrolysis by water. Studies on mechanical properties showed that the PCP cured with HMTA gave a tensile strength of 16.9–21.5 MN/m2 and an impact strength of 1.63–2.04 J. compared to 24–48 MN/m2 and 1.35 J, respectively, for phenol formaldehyde (novolac) resin prepared under similar conditions. The lap shear strength of PCP-bonded wood pieces showed a value of 400 ± 10 N/cm2 in comparison to 60 ± 10 N/cm2 of cardanol formaldehyde (novolac) resin, indicating that phosphorylation improves the bonding characteristics. With a phosphorus content of 7.9%, PCP showed good fire-retardant properties. Vertical burning studies did not show any propagation of fire or any afterglow. PCP cured with HMTA gave a limiting oxygen index value of 35, which on bromination increased to 42.0. PCP could find application as polymeric fire-retardant additive for plastics and elastomers or as filled or unfilled fire-resistant plastics/composite products.