The grafting of hydroxy telechelic polybutadienes (HTPBD) by 2-mercaptoethanol to saturate 1,2-double bonds which enabled an increase of the -OH functionality of HTPBD is presented. The functionalities of the virgin and grafted HTPBD were characterized both by H-1-NMR after silylation of the hydroxy end groups and the consumption of the mercaptan was determined by iodine titration. The radical addition of 2-mercaptoethanol to HTPBD was notcomplete, which is not acceptable for an industrial application. Hence, the excess of mercaptan was reacted to allyl alcohol, leading to a new short telechelic diol able to be incorporated in the polyurethane (PU) network as a chain extender. This PU was prepared by addition of hexamethylene diisocyanate to both these diols. The thermal (glass transition, T-g, and decomposition temperatures), physical (gel time and viscosity), and mechanical (Shore hardness) properties were assessed. It was noted that the higher the hydroxyl functionality, the greater the Shore hardness, the viscosity, and the modulus but the lower the gel time and the break elongation. However, no improvement of the thermal stability was observed with the use of grafted HTPBD in PU resins. Their T-g＇s were observed to undergo a slight increase (of 4 degrees C) in the case of PU prepared from Poly ED R45 HT(R) in contrast to that noted from Poly ED 20 LM(R) (20 degrees C), showing a lower phase segregation in that latter case. (C) 2000 John Wiley & Sons, Inc.