To improve the flame retardancy and mechanical properties of epoxy (EP), a novel intercalated layered double hydroxides (ILDHs) were synthesized by a solution intercalation method using ammonium alcohol polyvinyl phosphate as intercalator. The ILDHs were examined by X-ray diffraction, Fourier transform infrared spectroscopy (FTIR), energy-dispersive spectrometry and scanning electron microscopy (SEM). The conditions for synthesis of ILDHs have been optimized. Thermogravimetric analysis indicated a good char-forming property of ILDHs. The flame retardancy of epoxy was improved by adding ILDHs. The EP composites containing 30-40 mass% ILDHs passed UL-94V-0 rating. Tensile strength was also enhanced by adding 30-40 mass% ILDHs, which was attributed to the involvement of physical cross-linking network among layered particles and polymer chains. The morphology and structures of residues generated during LOI test were investigated by SEM and FTIR to support a fundamental analysis for the mechanism of char formation. SEM observations of residues of the ILDHs/EP confirmed the formation of an incompact charred layer during combustion, which could inhibit the transmission of heat and mass during combustion. It may be inferred that ILDHs acted as a catalyst for esterification, dehydration and compact char formation of EP system.