The clinical outcomes of polymethylmethacrylate (PMMA) bone cement used to fill gaps or marrow cavities of bones and bone defects are limited due to poor handling properties, mismatched mechanical properties with natural bone and lack of osteogenesis for bone healing. In this study, a series of PMMA bone cements containing active nano-MgO particles (nano-MgO/PMMA) were prepared. The handling and mechanical properties were systemically evaluated according to an International Standardization Organization standard (ISO 5833:2002). The biocompatibility and osteogenic activity of nano-MgO/PMMA were also analysed in vitro. The osteogenic effects of nano-MgO/PMMA were assessed in a rat calvarial critical bone defect model. The addition of less than 15 wt% nano-MgO to PMMA improved the handling properties of PMMA. Compared with PMMA, the compression modulus and strength of 20MP (20 wt% nano-MgO to PMMA) decreased to 0.725 ± 0.023 GPa and 25.38 ± 2.82 MPa, respectively. In vitro studies with MC3T3-E1 showed that nano-MgO/PMMA had better biocompatibility than the PMMA group after 7 days of culture. The nano-MgO/PMMA groups showed more calcium nodules and higher osteogenic gene expression levels than PMMA after 12 days of osteogenic induction of the rat BMSCs. The in vivo studies analysed by micro-CT and histomorphology results proved that nano-MgO/PMMA could significantly enhance new bone formation. The mean new bone mineral density in the nano-MgO/PMMA group was 50% greater than that in the PMMA group. In addition, biomechanical tests showed that nano-MgO/PMMA was superior to PMMA in bone-bonding strength after 12 weeks implantation. Therefore, the nano-MgO/PMMA bone cement has good potential in joint fixation and bone defect filling applications.