Mass production of graphene was successfully achieved with a simple and environmentally friendly electrochemical exfoliation approach. The obtained graphene was noncovalently modified by ligninsulfonate and iron ion (Fe-lignin) to form the flame retardant functionalized graphene sheets (FGNS). Subsequently, FGNS was introduced to reduce fire hazards of thermoplastic polyurethane (TPU). The FGNS/TPU nanocomposites presented higher thermal conductivity, thermal stability, and flame retardancy than those of neat TPU. By adding 2.0 wt% FGNS, a significant reduction (62.8%) in peak heat release rate (pHRR) and high char yield (from 3.6 to 9.4 wt %) were observed. During the combustion, in situ formed char derived from catalysis action of Fe,lignin can protect the layer structure of graphene to further hinder the transfer of pyrolysis volatile with barrier effect. The simple functionalization of graphene shows a promising application prospect in polymer nanocomposites.