Magnesium silicate hydrate (M-S-H) cement, a type of green building material, has poor volume stability (i.e., large shrinkage deformation), which limits its application. As a new type of admixture, the behavior of a shrinkage-reducing admixture (SRA) in M-S-H cement has not been studied. Therefore, in this research, the effect of SRA on the shrinkage properties of the M-S-H cement system was evaluated. The mechanism of SRA was investigated by surface tension measurement, hydration heat testing, thermogravimetric analysis, and pore structure analysis. Experimental results indicate that SRA can reduce the shrinkage of the M-S-H mortar, and the optimal effect is exerted when the dosage is 3.0%, drying shrinkage decreases by 22.6%, and autogenous shrinkage decreases by 60% on day 28. However, it may also adversely affect strength development. The presence of SRA in M-S-H cement can reduce pore solution surface tension, delay hydration, and maintain relative humidity within the slurry, which can be maintained at 82.0% on day 28. It can also increase pore size and porosity. The inhibitory effect of SRA on the shrinkage of M-S-H mortar is valuable for its future practical applications.