Highly transparent MgO ceramic was prepared by hot isostatic pressing (HIP) technique of vacuum-sintered MgO compact using CaO as the sintering additive. Densification process of MgO ceramic is significantly enhanced by doping 0.5 at% CaO at the vacuum-sintering temperature of 1100–1350 °C. By subsequent HIP sintering at 1650 °C, the relative density of 0.5% CaO-doped MgO ceramic vacuum-sintered at 1350 °C increases from 94.67% to 99.97%. It attains high in-line transmittance of 70.78% at 600 nm and 87.59% at 6000 nm, respectively. Meanwhile, the thermal conductivity reaches 53.2 W/(m∙K), demonstrating that CaO-doped MgO is a promising candidate material as the secondary phase of phosphor composite ceramics. Herein, 0.5% CaO-doped MgO-YGAG:Ce (Y2.82Gd0.18Al5O12:Ce) composite ceramic with stable binary-phase structure, high relative density of 99.1% and thermal conductivity of 32.6 W/(m∙K) was synthesized by vacuum-sintering at 1350 °C and the luminescence performance under blue laser excitation was evaluated.