The effect of thermoplastic polyurethane elastomer (TPUE) on mechanical properties of modified double-base propellants was investigated by dynamic mechanical analyzer (DMA) and tensile strength measurement, and its function mechanism was analyzed by scanning electron microscope (SEM). Results show that TPUE remarkably improves mechanical properties of propellants. The elongation of the propellants increases by above 50% at room temperature and high temperature, while at low temperature tensile strength increases by 15% and elongation by 16% because the TPUE enhances the adhesion strength between filler and binder and decreases “de-wetting”. The variation of α-relaxation was explained through “free volume theory” and activation energy of relaxation process as well. It is concluded that the mechanical properties at high temperature are related to the magnitude and the activation energy of α-relaxation on tanδ, while those at low temperature are related to activation energy of the β-relaxation on tanδ or “fragility parameter”.