This study presents a one-step synthesis of a magnesium amino-tris-(methylenephosphonate) (Mg-AMP)-reduced graphene oxide (Mg-rGO) hybrid involving graphene oxide (GO) reduction and growth in situ of Mg-AMP nanoparticles in the absence of a reducing agent. Mg-rGO was characterized by X-ray diffraction, X-ray photoelectron and Fourier-transform infrared spectroscopies, transmission electronic microscopy, and thermogravimetric analysis (TGA). Mg-rGO was then used to prepare flame-retardant and toughened phenolic (PF) foam. This additive was found to enhance the compressive and flexural strengths of PF foam as well as to reduce its high friability and brittleness. The limiting oxygen index of the foam with 4 phr Mg-rGO (sample PF/4Mg-rGO) increased to 41.5%, compared with the 38% of untreated foam; the peak heat release rate and total heat release of sample PF/4Mg-rGO were decreased by 28.7 and 18.4%, respectively. Also, the total smoke release and peak CO production rate of PF/4Mg-rGO were reduced by 52.5 and 38.1%, respectively. TGA results indicated that Mg-rGO clearly improved the thermal stability of PF foam.