In this work, a starch-water mixture was blended with polyurethane prepolymer (PUP) at 0, 5, 10, 15, and 20 wt% and extruded in a twin screw extruder. The ensuing results showed that the reaction ratio of PUP used for modified starch was 98.6 AE 0.3%. This was attributed to the polyurethane particles being formed under shear stress during extrusion processing. Each polyurethane particle contained many NCO groups with high reaction activity, which therefore increased the reaction probability of PUP micro-particles with starch. The elastic and hydrophobic PUP played an important role in improving the properties of modified starch. SEM showed that the starch and polyurethane had good compatibility; the toughness, hydrophobicity, and thermal stability of modified starch thus sharply improved. This work provided a method for the preparation of high reaction efficiency modified starch.