Aluminum hypophosphite combined with melamine cyanurate and poly(phenylene oxide) was applied to flame-retard TPE-S system (blends of SEBS and polyolefin). The flame-retardant properties of the TPE-S/AHP/MCA/PPO were investigated by LOI and vertical burning test (UL-94). The results indicated that TPE-S containing 16 wt% AHP, 20 wt% MCA, and 10 wt% PPO reached a V-0 rating in the UL-94 test, and its LOI value was 28.2%. It performed well in the cone calorimeter (reduction in peak heat release rate from 2001 to 494 kW m−2). Thermogravimetric-Fourier transform infrared spectroscopy tests showed that AHP and MCA acted in gaseous phase, while AHP and PPO helped to form char residue. The SEM graphs demonstrated that continuous and compact films cover bubbles of the char layer in TPE-S/AHP/MCA/PPO. The proposed flame-retardant mechanisms of such systems were summarized.