An aqueous coating composition containing polymeric binder comprising particles of polyurethane-acrylic hybrid polymer dispersed in aqueous medium containing i) polyurethane polymer, preferably from 0.1 to 75 wt% ii) copolymer of ethylenically unsaturated addition copolymerisable monomers, preferably from 25 to 99.9 wt% characterised in that the polyurethane polymer comprises the reaction product of a) a polyisocyanate b) a compound containing at least two moieties reactive with the isocyanate moieties of the polyisocyanate c) a compound containing at least one dispersing moiety and at least one moiety reactive with the isocyanate moieties of the polyisocyanate d) a chain extender compound e) a urethane diol, being the reaction product of a cyclic carbonate and a compound containing an amino group and a further group selected from amino and hydroxy, said urethane diol comprising up to 80 wt% of the polyurethane polymer. The coatings have improved abrasion, water and stain resistance. Also an aqueous dispersion and a urethane prepolymer for use in making the dispersion.