In this paper, the flame retarding mechanism of novolac as char agent and the phosphorous–nitrogen (P–N) flame retardant system was investigated in thermoplastic poly(ether ester) elastomer(TPEE) composites containing aluminum diethylphosphinic (AlPi) and melamine polyphosphate (MPP). The fire resistance of TPEE containing P–N flame retardant and novolac was analyzed by the limiting oxygen index (LOI) and the vertical burning (UL94) test. The result shows that the flame retardants containing P–N increased the LOI of the material from 17.3 to 27%. TPEE containing P–N flame retardants just got UL94 V-2 ranking, which resulted in the flaming dripping phenomenon. On the other hand, TPEE containing P–N flame retardant and novolac achieved UL94 V-0 rating. The mechanism of thermal decomposition and char formation was studied by thermal gravimetric analysis (TGA), temperature-dependent FTIR and Pyrolysis/GC/MS. TGA and SEM-EDX measurements have demonstrated that novolac results in the increase of char yield and the formation of the thermally stable carbonaceous char. The results of FTIR and Pyrolysis/GC/MS analyses indicated that cross-linking reaction between the novolac and P–N flame retardant and polyaromatisation of the novolac itself which resulted in a strong compact carbonaceous char. Therefore, novolac is a promising synergist for the P–N flame retardant in TPEE.