Modified magnesium-aluminate spinels (MgAl2O4) were prepared by recrystallizing a mixture of MgAl2O4 and zeolite Y nanoclusters in acidic medium to improve the acidity of MgAl2O4, which was commonly used as a sulfur transfer agent in fluid catalytic cracking (FCC) units. The acidity and basicity of these samples can be tuned by varying the pH value of the synthesis system. From the characterization and catalytic cracking tests the introduction of zeolitic building units into the spinels contributed to the increased microporosity, acidity, and hydrothermal stability. The catalytic results indicate that the activities and the product selectivities of the modified spinels for vacuum gas oil (VGO) cracking improved remarkably compared to the parent spinel. These samples exhibited even better performance than Kaolin clay for VGO cracking while retaining a part of the basic sites for oxidative SO2 uptake. Moreover, the FCC catalyst prepared using the modified spinel as a partial matrix, after equilibration, also gave superior catalytic behavior compared to a reference FCC catalyst with Kaolin clay as the main matrix.