Sustainable polyurethane dispersion with smart properties has enormous potential in the polymer industries because of its unique and environmentally friendly characteristics. Biodegradable water dispersion thermoplastic polyurethanes (WBPUs) with self-healing capability were synthesized, and they were water-dispersible after neutralization with triethylamine (TEA). The biobased macroglycol and chain extender were synthesized via the catalyst-based esterification reactions of dimer acid (DA), poly(ethylene glycol) (PEG 200), citric acid (CA), and glycerol. Three different compositions of WBPUs were synthesized by reacting poly(epsilon-caprolactone) diol (PCL, M.W similar to 2000 g/mol) and biobased macroglycol with aliphatic and aromatic diisocyanates in the presence of various amounts of branch generating unit. FT-IR, (HNMR)-H-1, (CNMR)-C-13, GPC, and XRD analyses of WBPUs were conducted to study the physicochemical structure, crystallinity, and molecular weight. The WBPUs exhibited high elongation at break (678.9-485.3%), toughness (51.49-32.6MJ m(-3)), tensile strength (9.26-7.82 MPa), scratch hardness (3.5-2 kg), gloss at 60 degrees (25.4-15.6), impact resistance (8.95-8.33 kJ/m), and chemical resistance. Furthermore, these WBPUs possessed microwave assisted self-healing and UV-aging characteristics, and they were found to be biodegradable.