Magnesium is projected for use as a degradable orthopedic biomaterial. However, its fast degradation in physiological media is considered as a significant challenge for its successful clinical applications. Bioactive reinforcements containing Mg-based composites constitute one of the promising approaches for developing degradable metallic implants because of their adjustable mechanical behaviors, corrosion resistance, and biological response. Strontium is a trace element known for its role in enhancing osteoblast activity. In this study, bioactive SrO-doped magnesium phosphate (MgP)-reinforced Mg composites containing 1, 3, and 5 wt % MgP were developed through the casting route. The influence of the SrO-doped MgP reinforcement on degradation behaviors of the composites along with its cell–material interactions and in vivo biocompatibility was investigated. The wt % and distribution of MgP particles significantly improved the mechanical properties of the composite. HBSS immersion study indicated the least corrosion rate (0.56 ± 0.038 mmpy) for the Mg–3MgP composite. The higher corrosion resistance of Mg–3MgP leads to a controlled release of Sr-containing bioactive reinforcement, which eventually enhanced the cytotoxicity as measured using MG-63 cell–material interactions. The in vivo biocompatibility of the composite was evaluated using the rabbit femur defect model. Micro-computed tomography (μ-CT) and histological analysis supported the fact that Mg–3MgP maintained its structural integrity and enhanced osteogenesis (50.36 ± 2.03%) after 2 months of implantation. The results indicated that the Mg–MgP composite could be used as a degradable internal fracture fixation device material.