A novel phosphorus-containing cardanol (PCC) derived from cardanol—a renewable meta-substituted phenol and harmful by-product of the cashew industry—in combination with 9,10-dihydro-9-oxa-10-phosphaphenanthrene-10-oxide (DOPO) was used to produce bio-based phenolic foams (PFs). The properties of the PFs were then characterized in detail. The PCC was fully characterized by using Fourier transform infrared spectroscopy (FTIR) and proton nuclear magnetic resonance (1H NMR), while the thermal degradation was studied and monitored by thermogravimetry coupled to FTIR (TGA/FTIR) and TGA coupled with mass spectrometry (TGA/MS). It was found that PCC exhibited high thermal stability. The total heat release, peak heat release rate and mean heat release rate of PF containing 4% PCC decreased by 13.55, 33.43 and 13.42%, respectively, in comparison with pristine PF. The enhanced flame-retardant behavior was attributed to the free radicals PO· produced during combustion, which captured free radicals in the gas phase; moreover, the phosphaphenanthrene group may create a char residue barrier against the further combustion of the polymer. Meanwhile, bio-based PFs showed excellent mechanical properties, as the compressive and flexural strength of PF with 4% PCC increased by 79.59 and 20.98%, respectively, in comparison with pristine PF. The pulverization ratio of bio-based PFs was reduced with the increase in PCC content. The findings in this study demonstrate that PCC could be used as a phenol substitute in the synthesis of PFs to overcome their intrinsic brittleness and high flammability.