Magnesium oxysulfate (MOS) cement is a potential low-carbon cementitious material with its characteristic depending on the reaction between light-burned magnesia (LBM) and MgSO4 solution. This work aimed to elucidate the effect of sepiolite with high adsorption ability on regulating the reaction within MOS cement. Replacement levels of LBM by sepiolite at 2 and 5 wt% were adopted. Hydration kinetics, microstructure, phase composition and compressive strength of MOS cement without and with sepiolite were studied. Results showed that adding sepiolite into MOS cement adjusted the ion distribution at the early hydration stage and promoted the reaction with an early onset of heat flow peaks. The presence of sepiolite refined the morphology of formed needle-like 5 Mg(OH)2·MgSO4·7H2O (517 phase) and strengthened the bond water within its structure. The high adsorption ability of sepiolite enabled the nucleation of 517 phase and amorphous phase onto its surface. Sepiolite also densified the poorly hydrated regions by tightly combining with the incompletely hydrated MgO grains. Consequently, compressive strength of MOS cement under air curing was improved after adding sepiolite.