Mg–Al alloys were inoculated by MgO powder. The effects of MgO addition amount, holding time after MgO addition and Al content on the grain refining efficiency were systematically investigated in the present study. The refining mechanism was discussed. MgO cannot serve as the effective substrate of primary α-Mg phase. Significant grain refinement of Mg–Al alloys with the Al content over than 2% could be obtained. Al is an indispensable element to ensure the grain refining efficiency of MgO addition on Mg alloys. The optimum MgO powder addition amount and the holding time were about 1.5% and 10 min, respectively. MgO could react with Al in Mg melt, resulting in the formation of MgAl2O4 particles. As the comparative experiments, the grain refinement on the pure Mg and Mg–3%Al alloy inoculated by MgAl2O4 powder was proven. Based on theoretical calculation and experimental results, the grain refinement of Mg–Al alloy inoculated by MgO powder is attributed to the newly formed MgAl2O4 particles, which could act as the effective heterogeneous nuclei of primary α-Mg phase.