A long alkyl chain quaternary phosphonium cationic surfactant is used to form stable bisphenol A diphenyl diphosphate (BDP) emulsion in water/acetone mixed solutions. BDP emulsion-based montmorillonite (BMMT) is prepared by cation exchange between quaternary phosphonium on the surface of the emulsion and montmorillonite. Nanocomposites of BMMT and poly(styrene-ethylene-butylene-styrene) (SEBS) thermoplastic elastomers are prepared by solvent blending. Morphology, dynamic mechanical properties and dynamic rheological analysis show that high content of BMMT can be uniformly dispersed in SEBS, while plasticized BDP reduces the entanglement of SEBS molecular chains and increases the friction loss between molecular chains and nanoclay. BMMT does not change the glass transition temperature of the SEBS soft segment, and the labyrinth effect of nanoclay can reduce the migration of BDP to the polymer surface. Flame-retardant tests show that BDP and nanoclay flakes form dense carbon during the combustion process, and the nanocomposite shows good flame retardancy and hydrolysis resistance.