A novel approach was used to prepare a new expanded polystyrene (EPS) composite based on calcium sulphate hemihydrate that significantly improves its fire performance. Negative pressure was applied to open cavities between the EPS beads and promoted the absorption of flame retardant slurry. Three fire retardant EPS (FR-EPS) composites with different densities were obtained. Although, a large number of inorganic additives were added, causing the increase in thermal conductivity to 0.043–0.045 W/(m∙K) and water absorption to 4.7–5.8%, the properties remained within an acceptable range. The results of limiting oxygen index (LOI), UL-94 vertical burning and Cone Calorimeter tests revealed that the FR-EPS1 increased LOI from 18.1% to 35.8%, achieved UL94 V-0 grade, decreased PHRR from 384.12 to 81.39 kW/m2, and reduced PSPR from 0.159 to 0.014 m2/s. With the continued increase of sample density, the measured LOI was further improved, while heat release and smoke production were better suppressed. TG results, and carbon residue after burning indicate that the endothermic dehydration reaction of calcium sulphate dihydrate and the physical barrier effect of the carbonaceous layer contribute to the extraordinary flame retardancy and smoke suppression of the FR-EPS composites.