Previous research on the feasibility of using biodegradable magnesium alloys for bone implant applications mainly focused on biocompatibility and corrosion resistance. However, successful clinical employment of endosseous implants is largely dependent on biological fixation and anchorage in host bone to withstand functional loading. In the present study, we therefore aimed to investigate whether bone–implant interface strength and osseointegration of a novel biodegradable magnesium alloy (Mg–Y–Nd–HRE, based on WE43) is comparable to that of a titanium control (Ti–6Al–7Nb) currently in clinical use. Biomechanical push-out testing, microfocus computed tomography and scanning electron microscopy were performed in 72 Sprague–Dawley rats 4, 12 and 24 weeks after implantation to address this question. Additionally, blood smears were obtained from each rat at sacrifice to detect potential systemic inflammatory reactions. Push-out testing revealed highly significantly greater maximum push-out force, ultimate shear strength and energy absorption to failure in magnesium alloy rods than in titanium controls after each implantation period. Microfocus computed tomography showed significantly higher bone–implant contact and bone volume per tissue volume in magnesium alloy implants as well. Direct bone–implant contact was verified by histological examination. In addition, no systemic inflammatory reactions were observed in any of the animals. We conclude that the tested biodegradable implant is superior to the titanium control with respect to both bone–implant interface strength and osseointegration. These results suggest that the investigated biodegradable magnesium alloy not only achieves enhanced bone response but also excellent interfacial strength and thus fulfils two critical requirements for bone implant applications.