In order to attain highly efficient flame retardant epoxy thermosets without deteriorating the thermo-mechanical performances, a 9,10-dihydro-9-oxa-10-phosphaphenanthrene 10-oxide (DOPO)-derived compound (tetra-DOPO) with different oxidation states of phosphorus and rich aromatic structures was successfully synthesized via addition and Atherton–Todd reactions. The molecular structure of tetra-DOPO was confirmed by the FTIR, 1H- and 31P-NMR spectra. The DMA measurement indicated that the addition of 5.0 wt% of Tetra-DOPO enhanced both the storage modulus and the glass transition temperature of the epoxy composite. The EP composite containing 5.0 wt% of Tetra-DOPO had an LOI of 30.0% and UL-94 V-0 grade, indicating the exceptional fire-retardant efficacy of tetra-DOPO. Additionally, in the cone calorimeter test, the PHRR, THR, and TSP values of EP/tetra-DOPO-5.0 were declined by 25.1%, 18.7%, and 13.9%, respectively, as compared to those of the EP. The reduced mean EHC value suggested the flame inhibition mechanism of tetra-DOPO in the vapor phase by emitting PO• radicals to quench the combustion chain reaction. The flame retardant mechanism of Tetra-DOPO was further clarified by detecting the pyrolytic gas species using TGA-FTIR as well as analyzing the microstructure of the char residues using SEM and Raman spectrometer. The main flame retardant mode of action of Tetra-DOPO was flame inhibition in the vapor phase, while it also played a relatively minor role in the condensed phase by forming an intact and compact char layer containing high graphitized structure.