In this study, dimer acid (DA) obtained from waste soybean oil was used together with propylene oxide (PO) to obtain novel polyether polyols [prepolymers for polyurethanes (PUs)] through ring‐opening polymerization reaction. The average molecular weight of polyols was estimated by gel permeation chromatography and titration method. The substantial reaction between DA and PO was evident from FTIR and nuclear magnetic resonance spectroscopy. Subsequently, the polyols were reacted with chain extender [ethylene glycol, (EG)] and 4, 4 ‐ Diphenylmethane diisocyanate (MDI) to prepare green PUs. The effect of molar ratio variation of EG and MDI with a fixed amount of polyols was estimated by measuring hydrophobicity and mechanical strength of PUs. The molar ratio such as 1 : 4 : 5.7 of polyol : EG : MDI was found to exhibit maximum hydrophobicity and improved mechanical strength that were comparable with typical PU sample prepared from commercially available polyol, such as polypropylene glycol. FTIR spectroscopic analysis confirmed the chemical changes and possible crosslinking in PUs. Thermalgravimetric analysis and differential scanning calorimetry analysis also showed substantial thermal stability of the green PUs. © 2014 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2015, 132, 41410.