Fe2O3 thin films have a wide range of applications in gas sensing, biosensing, optoelectronics, spintronics, etc. In this paper, pure and Mg doped Fe2O3 thin films are prepared onto glass substrates by a simple chemical spray pyrolysis technique. Cubic and rectangular cuboid shaped nanocrystals are observed in the FESEM images of the films up to 6 at% Mg concentration. XRD patterns of Mg doped Fe2O3 thin films match with the corundum structure showing the predominance of (104) orientation. Crystallite size increases from 29 to 87 nm with the increase of Mg concentration in the films. Raman spectroscopy indicates that Mg doped Fe2O3 thin films consist of only pure hematite or α-Fe2O3 phases. Chemical composition of the films are confirmed by energy dispersive X-ray analysis. Optical transmittance and band gap rise with the uplift of Mg concentrations. The maximum transmittance is found to be 83% for 10 at% Mg doped Fe2O3 thin film. In the photoluminescence spectroscopy, green emission is dominant up to 6 at% Mg doping and dominance of blue emission is observed in the 8 and 10 at% Mg doped Fe2O3 thin films. The n-type electrical conductivity of Fe2O3 changed into p-type for 6, 8 and 10 at% Mg doping. Electrical resistivity is found in the order of 105 Ω-cm which rises with Mg concentration. Pure Fe2O3 thin film shows ferromagnetic nature, whereas Mg doped Fe2O3 thin films show ferrimagnetic nature at room temperature. Mg doped Fe2O3 thin films may be suitable for sensing purposes and high power devices.