Background: The nucleus $^{32}$Mg ($N=20$ and $Z=12$) plays a central role in the so-called "island of inversion" where in the ground states $sd$-shell neutrons are promoted to the $fp$-shell orbitals across the shell gap, resulting in the disappearance of the canonical neutron magic number $N=20$. Purpose: The primary goals of this work are to extend the level scheme of $^{32}$Mg, provide spin-parity assignments to excited states, and discuss the microscopic structure of each state through comparisons with theoretical calculations. Method: In-beam $\gamma$-ray spectroscopy of $^{32}$Mg was performed using two direct-reaction probes, one-neutron (two-proton) knockout reactions on $^{33}$Mg ($^{34}$Si). Final-state exclusive cross sections and parallel momentum distributions were extracted from the experimental data and compared with eikonal-based reaction model calculations combined with shell-model overlap functions. Results: Owing to the remarkable selectivity of the one-neutron and two-proton knockout reactions, a significantly updated level scheme for $^{32}$Mg, which exhibits negative-parity intruder and positive-parity normal states, was constructed. The experimental results were confronted with four different nuclear structure models. Conclusions: In some of these models, different aspects of $^{32}$Mg and the transition into the island of inversion are well described. However, unexplained discrepancies remain, and even with the help of these state-of-the-art theoretical approaches, the structure of this key nucleus is not yet fully captured.
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