A novel plasticizer based on cardanol, hydrogenated cardanol glycidyl ether acetic ester containing phosphaphenanthrene group (HCGEP), was prepared and incorporated into poly(vinyl chloride) (PVC) for the first time. The molecular structure was characterized with Fourier transform infrared and 1H NMR spectroscopies. The thermal degradation behavior and flame retardant performance of PVC films with HCGEP as secondary or main plasticizer were investigated using thermogravimetric analysis, combustion tests, limiting oxygen index tests and morphological analysis of residues. Furthermore, the mechanical properties of PVC films were examined based on the results of tensile testing. The results were compared to those of the petroleum‐based plasticizer dioctyl phthalate. With the substitution of dioctyl phthalate with HCGEP, PVC films exhibited high thermal stability and better flame retardant performance. The tensile test results showed that the addition of HCGEP could endow PVC resin with well‐balanced properties of flexibility, strength and hardness. © 2017 Society of Chemical Industry