In recent years, the use of renewable resources has attracted the attention of many technologists as potential substitutes for petrochemicals, mainly from forest products. Palmeri oil, vernonia oil, castor oil and recently the cardanol oil are naturally synthesized with multiple functionality and are a new source of renewable resources which have a very bright future as an alternative to petroleum feedstock [1–3]. Since the invention of polyurethane by Bayer in 1937, the utilization of polyurethane is ubiquitous. Polyurethanes are block copolymers containing blocks of low molecular weight polyesters or polyethers covalently bonded by a urethane group (-NHCO=O). These polymers are synthesized by reacting three basic components consisting of polyisocyanate, polyhydroxyl-containing polymer (i.e. polyester or polyether polyols) and a chain extender, which is usually low molecular weight diols or diamines (i.e. 1,4-butanediol or 1,4-dibutylamine) [4]. Currently, there is a wide range of polyisocyanates, polyols and chain extenders commercially available and this has led to almost unlimited possibilities for polyurethane materials. Because of the inherent versatility on polyurethane syntheses, the properties of this class of polymers can be easily engineered to suit the applications required. Palm kernel oil is the focus of this study because it is available in abundance in Asia, especially Malaysia. In addition, it is produced from the production of palm fruit as much as 3.8 tons per hectare per annum [5], as well as offering very low market price. In this study, the RBD (refined-bleached-deodorized) palm kernel oil was derivatized using a new development in polyurethane technology by combination with polyethylene glycol under basic condition. Methods used in the process involved polycondensation and transesterification [6] where low reaction temperature and short reaction time as well as high percentage of yield are offered. The RBD palm kernel oil (Lee Oilmill, Klang) together with a reagent, which was a mixture of proprietary polyhydroxyl compound and basic catalyst were reacted at ratio of 80 : 20 to get the highest functionality value possible. The reaction was carried out in laboratory scale. The mixture was continuously stirred in a 2L-glass reactor and was maintained at 183± 2 ◦C for 20–30 min, with nitrogen blanket throughout the process. The reflux flask was connected to a condenser and the vacuum pump to withdraw the water from the system. The progress of the reaction was monitored by sampling at intervals. The samples were then analyzed. At the end of the reaction, the polyol produced was kept in a sealed cap glass container for analysis. 120 g of crude MDI (Cosmonate M-200, Cosmopolyurethane, Port Klang) was poured into 100 g of the mixture of the RBD palm kernel oil polyol with additives (surfactant, catalyst and water) and was mixed thoroughly using a standard propeller with speed of 3500 rpm for 10 s. The mixture was then poured into a waxed mold, covered and screwed tight. The foam was demolded after 10 min. It was then conditioned for 16 h at 23± 2 ◦C before characterization. Foams were characterized for their apparent densities, compression strength, dimensional stability and water absorption following the standard method BS 4370: Part 1: 1988 (Rigid polyurethane foam produced by the press injection method). The RBD palm kernel oil changed from a cloudy pale yellow solid (at 24–25 ◦C) before derivatization to a clear golden yellow liquid after reaction. It has a viscosity of 262.5 mpa s and density 948.2 kg/m3 at 25 ◦C. The moisture content was 0.12% and it had a pH value of about 9–10. The cloud point was observed at 13 ◦C. The hydroxyl number calculated was approximately in the range of 350–370 mg KOH/g sample. Through gel permeation chromatography (GPC), the molecular weight was calculated at the range of 430– 450, leading to functionality value of 2.8–3.0. The purity of the synthesized polyol was checked by thin layer chromatography and was confirmed to be reproducible. Fig. 1 show the two peaks used for monitoring the derivatization process. Peak B does not appear in the FTIR spectrum of underivatized RBD palm kernel oil. The ratios of the percentage transmittance of these two peaks are calculated and plotted against the reaction temperatures.