The anharmonic lattice dynamics of MgO has been studied at ambient conditions and at high temperatures by infrared spectroscopy and inelastic x-ray scattering measurements combined with density functional perturbation theory calculations. The agreement between the measured phonon energies and widths with ab initio calculated values provides a direct and pertinent test of the validity of advanced theoretical methods. Long observed anharmonic features in the infrared reflectivity find a clear explanation in terms of well-defined multiphonon scattering processes and lattice dynamics peculiarities, also responsible for a significant and sharp reduction of the longitudinal optical phonon lifetime at critical finite wave vectors. Our work highlights the importance of multiphonon scattering processes on the collective dynamics and related material properties.