The aim of this work was to develop halogen-free glass-fiber reinforced poly(1,4-butylene terephthalate) (GRPBT) composites with significantly improved fire retardancy performance using a novel flame retardant system. The system was composed of aluminum hypophosphite (AHP), polycarbonate (PC), and melamine cyanurate (MC). The GRPBT composite containing the system achieved a V-0 classification in UL-94 testing (the thickness of testing bar was 0.8 mm). In microscale combustion calorimeter and cone calorimeter testing, both of the two different PHRRs (peak of heat release rate) for GRPBT composites were remarkably reduced by the incorporation of the novel system. Thermogravimetric analysis and residue characterization revealed that the addition of PC promoted the formation of char residues leading to the reduction of mass loss rate, which resulted in the improvement of fire retardancy.