To enhance the fire safety performance in polystyrene (PS), a novel organic–inorganic hybrid material (FGO–AHP) was successfully prepared by the combination of functionalized graphene oxide (FGO) and aluminum hypophosphite (AHP) via a chemical deposition method. The resulting FGO–AHP nanohybrids were incorporated into PS via a masterbatch-melt blending to produce PS/FGO–AHP nanocomposites. Scanning electron microscope images confirm the homogeneous dispersion and exfoliation state of FGO–AHP in the PS matrix. Incorporating FGO–AHP significantly improves the thermal behavior and fire safety performance of PS. By incorporating 5 wt% FGO–AHP, the maximum mass loss rate (MMLR) in air, total heat release (THR), and maximum smoke density value (Dsmax) of PS nanocomposite achieve a reduction of 53.1%, 23.4%, and 50.9%, respectively, as compared to the pure PS. In addition, thermogravimetry–Fourier transform infrared (TG–FTIR) results indicate that introducing FGO–AHP notably inhibits the evolution of volatile products from PS decomposition. Further, scanning electron microscopy (SEM), FTIR, and Raman spectroscopy were employed to investigate the char residue of PS nanocomposite samples, elaborating the flame-retardant mechanism in PS/FGO–AHP nanocomposites.