The present invention provides a coated yarn and a method for manufacturing a coated yarn having outstanding physical properties, the method comprising: collecting thermoplastic polyurethane in virgin form, or from scraps remaining after usage, for example, those used for airbag patterns in a shoe manufacturing process, or from scraps remaining after other thermoplastic polyurethane is processed; mixing the various kinds of thermoplastic polyurethane with various additives; compounding the resultant mixture using an extruder to prepare a thermoplastic polyurethane compound for a coated yarn; and coating the surface of a yarn made from polyester, nylon, spandex, etc. with the compound using an extruder.