A high-phosphorus-content polyphosphonate (PBDA), containing two phosphorus-based structures: phosphaphenanthrene (DOPO) and phenyl phosphonate groups, was synthesized and used in flame retardant polyethylene terephthalate (PET). Good self-extinguishing property (high UL 94 grade and LOI value), superior flame retardancy (lower heat/smoke release), and high quality retention (high carbon residue) were endowed to PET by PBDA. When 10 wt% PDBA was added, the peak heat release rate (pHRR), total heat release (THR), and total smoke rate (TSR) of PDBA/PET were found to be significantly reduced by 80%, 60.5%, and 21%, respectively, compared to the pure PET, and the LOI value jumped from 20.5% for pure PET to 28.7% with a UL-94 V-0 rating. The flame-retardant mode of action in PET was verified by thermogravimetric analysis-Fourier transform infrared (TGA-FTIR), pyrolysis gas chromatography/mass spectrometry (Py-GC/MS), real-time FTIR, and scanning electron microscopy (SEM). Phosphaphenanthrene and phosphonate moieties in PDBA decomposed in sequence during heating, continuously releasing and keeping high-content PO· and PO2· radicals with a quenching effect and simultaneously promoting the formation of viscous crosslinked char layers causing a high barrier effect. PDBA mainly acted in the gas phase but the condensed-phase flame retardant function was also considerable.