A bio-polyol phosphonate acting as the polyol component in the preparation of polyurethane foam was synthesized from the liquefaction product of bagasse by the halogenation of the liquefaction product followed by the Michaelis–Arbuzov rearrangement. The FT-IR spectra showed that phosphorus-containing groups were introduced into the polyol chain. The data of the viscosity and the hydroxyl number suggested that the bio-polyol phosphonate would be a good polyol component in the preparation of polyurethane foam. The limiting oxygen index of polyurethane foam containing bio-polyol phosphonate varied in the range of 24–28, while that of polyurethane foam without bio-polyol phosphonate was 23, demonstrating that the introduction of the phosphorus-containing group into the polymer helped to improve the flame retardancy. © 2014 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2014, 131, 40422.