Graphene sheets with a range of unusual properties and thermoplastic polyurethane (TPU) were combined to modify polyvinyl chloride (PVC), and the enhanced properties such as flexibility, thermal stability and mechanical properties of the PVC were investigated. In order to avoid the C − Cl bonds in PVC being weakened, graphene was incorporated into TPU in the melting state first and then this TPU was employed as a modifier to enhance and plasticize PVC in another melt blending step. In comparison with the ternary blending method, this step‐by‐step melt blending method was more efficient and convenient. The distribution of graphene sheets in the polymer matrix is uniform and no C − Cl bond weakened effect can be observed. Due to the similar polarity, TPU showed good compatibility with PVC and its plasticizing effect allowed a broader range of low temperature flexibility of the modified PVC matrix. Moreover, other properties of the resultant PVC matrix (PTG‐x) including mechanical properties, thermal stability and plasticizer migration resistance were all found to be improved. With innovative applications in mind, the development of new graphene‐based materials will certainly lead to many future advances in science and technology. © 2017 Society of Chemical Industry