Aqueous urethane dispersion resin begins to assume commercial importance due to increasing environmental awareness of VOC in coating industry. Moreover there have been strong industrial needs for the development of reactive-type polyurethane flame retardant coatings. In this study, chlorinated polyester polyols were synthesized by two step polycondensation reaction using mono chloroacetic acid, adipic acid, trimethylol propane, and 1,4-butanediol. In the next step polyurethane dispersion was prepared using these chlorinated polyester polyols and isophorone diisocyanate with dimethylol propionic acid(DMPA) and trimethylamine. The structure of chlorinated polyol was characterized by GPC, FT-IR and NMR. Particle size and its distribution were examined in terms of various dispersion parameters including molecular weight and composition of polyol, amount of DMPA, and NCO/OH ratio, etc. The effect of chlorinated polyols on flammability was also evaluated.