The aim of this study was to develop a novel biodegradable magnesium (Mg) alloy for bone implant applications. We used scandium (Sc; 2 wt %) and strontium (Sr; 2 wt %) as alloying elements due to their high biocompatibility, antibacterial efficacy, osteogenesis, and protective effects against corrosion. In the present work, we also examined the effect of a heat treatment process on the properties of the Mg‐Sc‐Sr alloy. Alloys were manufactured using a metal casting process followed by heat treatment. The microstructure, corrosion, mechanical properties, antibacterial activity, and osteogenic activity of the alloy were assessed in vitro. The results showed that the incorporation of Sc and Sr elements controlled the corrosion, reduced the hydrogen generation, and enhanced mechanical properties. Furthermore, alloying with Sc and Sr demonstrated a significantly enhanced antibacterial activity and decreased biofilm formation compared to control Mg. Also, culturing Mg‐Sc‐Sr alloy with human bone marrow‐derived mesenchymal stromal cells showed a high degree of biocompatibility (>90% live cells) and a significant increase in osteoblastic differentiation in vitro shown by Alizarin red staining and alkaline phosphatase activity. Based on these results, the Mg‐Sc‐Sr alloy heat‐treated at 400°C displayed optimal mechanical properties, corrosion rate, antibacterial efficacy, and osteoinductivity. These characteristics make the Mg‐Sc‐Sr alloy a promising candidate for biodegradable orthopedic implants in the fixation of bone fractures such as bone plate‐screws or intramedullary nails.