A 9,10-dihydro-9-oxa-10-phosphaphenanthrene-10-oxide (DOPO)-based derivative (PN-DOPO) combined with aluminium phosphates-coated sepiolite (Sep@AlPO4) was used to improve the flame retardance, thermal stability and mechanical performances of poly (ethylene oxide) (PEO)/poly (butylene adipate-co-terephthalate) (PBAT) blends. The synergistic effects of PN-DOPO and Sep@AlPO4 on flame-retarded PEO/PBAT composites were systematically discussed. Results indicated that introducing 5 wt% Sep@AlPO4 with 10 wt% PN-DOPO into PEO/PBAT achieved a V-1 rating for the UL-94 test and increased the limiting oxygen index value to 23.7%. Moreover, the peak heat release rate (p-HRR), average HRR and total heat release values of PEO/PBAT/PN10%/Sep5% composites decreased by 35.6%, 11.0% and 23.0% compared with those of PEO/PBAT, respectively. Thermogravimetric analysis (TGA) results confirmed that PN-DOPO/Sep@AlPO4 enhanced the initial thermal stability and char yield of PEO/PBAT matrix, and TGA/Fourier transform infrared spectrometry results revealed that the composites exhibited the characteristic absorption peaks of phosphorous-containing groups and an increase in gas-phase volatiles during thermal degradation. The morphological structures of the residues indicated that PN-DOPO and Sep@AlPO4 mixtures produced a more dense and continuous char layer on the composite surface during burning. Rheological behaviour revealed that higher complex viscosity and modulus values of PEO/PBAT/PN-DOPO/Sep@AlPO4 sample could also promote the crosslinking network structure of condensed phases during combustion. Furthermore, the PEO/PBAT/PN-DOPO/Sep@AlPO4 composites exhibited superior elongation at break and flexural performance than the PEO/PBAT system. All results demonstrated that the PEO/PBAT system modified with PN-DOPO/Sep@AlPO4 showed remarkable flame retardance, and improved thermal stability and mechanical properties, indicating its potential application in areas requiring fire safety.