To improve the thermal stability and flame retardancy of poly(vinyl chloride) (PVC) based composites, magnesium borate hydrate-mechanically activated lignin (MBH-MAL) complex was in-situ synthesized by hydrothermal method for using as a novel additive. In addition, MBH-lignin (MBH-L) complex, MAL, MBH, and common mixing of MBH and MAL (MBH+MAL) were also prepared for comparative investigation. MBH-MAL showed synergistic improving effect on PVC as MBH-MAL/PVC composite exhibited excellent thermal stability and flame retardancy. The static thermal stability time was 871 s and limit oxygen index was 32.54%, indicating that MBH-MAL effectively inhibited the generation of HCl from thermal decomposition of PVC and prevented the combustion of PVC based composites in air. MBH-MAL/PVC composite still exhibited outstanding tensile and flexural properties. Moreover, the enhancing mechanism of MBH-MAL on the thermal stability and flame retardancy of PVC based composites was proposed.