Thermal-expandable microcapsules (TEMs) for water-based coatings were synthesized with co-polymer of Acrylonitrile (AN) - Methyl methacrylate (MMA) - Ethylhexyl acrylate (EHA) - Divinylbenzene (DVB) as shell and toluene-p-sulfonyl hydrazide as core by suspension polymerization method. It was found that the microcapsules with desirable thermal expansion property and good heat stability could be obtained with a shell monomers composition of 70% AN /20% MMA /9% EHA /1% DVB. When 2% styrene-maleic acid copolymer (SMC) as emulsifier and 3% poly (vinyl pyrrolidone) (PVP) as dispersing agent were used, well defined spherical and more uniform microcapsules could be prepared. It was also found that when the shell/core mass ratio was 3:1, an encapsulation efficiency of ca. 94.5% could be achieved. Beyond this ratio, the increase of encapsulation efficiency reached a plateau. The 100 μm thickness film of water-based coating containing 5% microcapsules could be expanded to the thickness of 450 μm after exposed at 150 °C for 2 minutes. TG analysis revealed the mass loss start temperature of coating increased by more than 30 °C when 5% microcapsules were added to water-based coatings, which demonstrated the flame-retardant function of the coatings.