In this study, a phosphorus-containing thermotropic liquid crystal copolyester (p-TLCP) was synthesized via melt polycondensation using 2-(6-oxid-6H-dibenzo<1,2>oxaphosphorin-6-yl)-1,4-benzenediol (DOPO-HQ), terephthalic acid (TPA), p-hydroxybenzoic acid (p-HBA), and dimethyl terephthalate (DMT) as raw materials with a molar ratio of 3:3:2:2. The flame-retardant p-TLCP was subsequently incorporated into polybutylene terephthalate (PBT) to fabricate composites. The thermal properties, flame retardancy, and mechanical performance of the PBT/p-TLCP composites were systematically investigated through limiting oxygen index (LOI), vertical burning (UL-94), cone calorimetry, dynamic thermomechanical analysis (DMA), tensile/impact testing, scanning electron microscopy (SEM), coupled with laser Raman spectroscopy (LRS) and Thermogravimetric-Fourier Transform Infrared Spectroscopy (TG-FTIR). Results revealed that the flame retardancy and mechanical properties of the composites were markedly improved with increasing p-TLCP content. When the p-TLCP addition was 10.0 wt.%, the LOI value of the composite increased from 22.0% (pure PBT) to 27.0%, achieving a UL-94 V-0 rating; at a p-TLCP loading of 12.5 wt.%, the peak heat release rate (PHRR) and total heat release (THR) decreased by 22.4% and 35.8% relative to pure PBT, respectively, while the storage modulus and tensile strength were elevated by 22.8% and 19.4%, with impact strength reaching 30.5% enhancement, demonstrating optimal comprehensive performance.