Magnesia refractory raw material with free CaO has inherent weaknesses of low resistance to hydration, thermal shock and slag penetration. In this work, micro-sized Al2O3 powder was added into such magnesia with the purpose of improving its comprehensive performances. The results showed that with increasing Al2O3 content, CaAl2O4 and MgAl2O4 phases were sequentially formed at the MgO grain boundaries, which enlarged the MgO grains and reduced the apparent porosity. Owing to the transformation of free CaO to CaAl2O4, reduction of apparent porosity and covering of intergranular MgAl2O4 on MgO grains, hydration of the specimens was inhibited effectively by introducing the Al2O3 addition. The formed CaAl2O4 and MgAl2O4 phases lowered the thermal expansion coefficient and induced crack deflection, and therefore residual flexural strength ratio after thermal shock tests increased remarkably from 15.1% to 33.2% with increasing Al2O3 addition from 0 wt% to 7 wt%. Moreover, slag penetration resistance of the specimens was improved effectively with raising the Al2O3 content to 3 wt%, attributing to the increase in MgO grain size, decrease in apparent porosity and formation of high stable intergranular CaAl2O4 phase. However, further increasing Al2O3 content would dramatically accelerate the slag penetration owing to the decrease in grain size and formation of more unstable intergranular MgAl2O4 phase.