Aged thermoplastic starch (TPS), plasticized with hydrophilic plasticizers such as glycerol, shows brittle property. It is critical to develop tough TPS without using hydrophilic plasticizers. In this work, polyurethane prepolymer (PUP) was synthesized and mixed reactively with TPS in an intensive mixer to prepare modified TPS. Structural and morphological analyses showed that polyurethane (PU) microparticles were formed in situ and dynamically cross-linked to the starch matrix through urethane linkages. The modified TPS without hydrophilic plasticizer become tough. The elastic polyol soft segments in PU played the role of impact modifier, improving the toughness of the modified TPS. Almost 100% of PU was cross-linked to starch, indicating high efficiency of the modification. Formation of multifunctional PU microparticles was essential to achieve the high reaction efficiency. The dynamically cross-linking modification is a novel, green, and efficient method for preparing tough TPS.