The flame retardancy mechanisms of a novel polyhedral oligomeric silsesquioxane containing 9,10‐dihydro‐9‐oxa‐10‐phosphaphenanthrene‐10‐oxide (DOPO‐POSS) in polycarbonate/acrylonitrile‐butadiene‐styrene (PC/ABS) blends are discussed. The thermal stability of PC/ABS composites with different DOPO‐POSS loadings are investigated by TGA and the enhancement of the thermal stability could be found at high temperature range. Their fire behavior is tested by the LOI, UL‐94, and cone calorimeter. Excellent flame retardancy of PC/ABS composites have been discovered with 10 wt% DOPO‐POSS loading. TGA‐FTIR, FTIR, XPS, and SEM, respectively, are used to characterize the gaseous products and the condensed residue in thermal decomposition, and the micro‐structure of the chars from cone calorimeter tests. The decomposition of PC/ABS with 10 wt% DOPO‐POSS shows significant changes compared with PC/ABS by TGA, FTIR, TGA‐FTIR, and XPS analysis. The enhancement of the thermal‐oxidative stability of PC/ABS with DOPO‐POSS is attributed to the interaction between DOPO‐POSS and PC/ABS at high temperature, which might be the key for improvement of the flame retardancy. Copyright © 2011 John Wiley & Sons, Ltd.