Thermal degradation of polymethylmethacrylate (PMMA) was studied by using inorganic salt of aluminum triiodide (AlI3). The composites of PMMA were prepared with AlI3 by changing the concentration of the AlI3 additive from 2% to 10% (w/w). The PMMA composites with AlI3 were characterized by TGA, DTG, SEM, FTIR, HBT, and Py-GC-MS techniques. The FTIR peaks of PMMA composite at 1316, 786, and 693 cm−1 justify the chemical association between PMMA and AlI3. TGA study shows that the stability of PMMA is enhanced by the addition of the AlI3 additive. SEM analysis represented that there is a relationship between polymer and additive when they are mixed at the molecular level. The horizontal burning test (HBT) also confirmed that the AlI3 additive produced the flame retarding properties in PMMA polymer. The burning rate of composite with 10% of AlI3 additive decreases five times as much as compared to pure PMMA polymer. Py-GC-MS analysis deduced that PMMA composite produced less toxic and environment-friendly substances (CO2) by the influence of AlI3 additive as compared to neat PMMA.