A low-cost and effective flame retarding expanded polystyrene (EPS) foam was prepared herein by using a hybrid flame retardant (HFR) system, and the influence of gypsum was studied. The surface morphology and flame retardant properties of the synthesized flame retardant EPS were characterized using scanning electron microscopy (SEM) and cone calorimetry testing (CCT). The SEM micrographs revealed the uniform coating of the gypsum-based HFR on the EPS microspheres. The CCT and thermal conductivity study demonstrated that the incorporation of gypsum greatly decreases the peak heat release rate (PHRR) and total heat release (THR) of the flame retarding EPS samples with acceptable thermal insulation performance. The EPS/HFR with a uniform coating and the optimum amount of gypsum provides excellent flame retardant performance, with a THR of 8 MJ/m2, a PHRR of 53.1 kW/m2, and a fire growth rate (FIGRA) of 1682.95 W/m2s. However, an excessive amount of gypsum weakens the flame retardant performance. The CCT results demonstrate that a moderate gypsum content in the EPS/HFR sample provides appropriate flame retarding properties to meet the fire safety standards.