The present invention provides a process for forming a waterborne composite polyurethane/acrylic polymer dispersion without the use of N-methyl pyrrolidone. The process includes polymerizing a reaction mixture of polyisocyanate, polyol, and a hydroxyl and carboxylic acid functional reactant in an organic solvent medium of alkyl carbonate, then adding ethylenically unsaturated monomers and inverting the mixture into an aqueous medium. Addition polymerization is performed to yield a waterborne composite polyurethane/acrylic polymer dispersion, and any remaining alkyl carbonate is hydrolyzed. The resulting aqueous polymer dispersions are environmentally friendly and are suitable for use in coating compositions that conventionally contained similar dispersions prepared in the presence of N-methyl pyrrolidone. Comparable physical properties are observed.