Undoped ZnO and Mg-doped ZnO (MZO) thin films were synthesized by sol-gel dip-coating technique. The effect of Mg dopant on the structural, surface-morphological, and optical properties together with the photocatalytic activities of the films was studied. Morphological study shows that incorporation of Mg increases the porosity of the films. Structural investigation reveals that Mg doping declines the crystallinity of the films. The optical analysis demonstrates that the Urbach energy of the films increases due to Mg doping, suggesting the formation of localized energy states. Photocatalytic activities of the films were evaluated by studying the degradation of methylene blue under the ultraviolet light irradiation. MZO demonstrates better photocatalytic efficiency compared to ZnO films. The enhanced photocatalytic efficiency of MZO can be attributed to the charge trapping by localized states, and porosity-induced surface area enhancement due to Mg doping.