Polymer dispersions are prepared by reaction of a polyisocyanate and a hydroxylmethyl containing polyester polyol derived from a fatty acid to form a prepolymer, dispersing the prepolymer in an aqueous phase and then curing the prepolymer to form solid particle particles. The prepolymers can be prepared having isocyanate, hydroxyl, or a variety of other reactive functional groups. The dispersions are useful in a variety of coating, sealant, adhesive and elastomer applications.