By using optical microscope and scanning electron microscope to observe the morphology in as-cast AZ81 magnesium alloy with the addition of CaO (0.1wt.%, 0.5wt.%, 0.9wt.%). Analysis the alloy phase by X-ray diffraction, test the mechanical properties of the alloy by using of the sophisticated electronic universal tensile testing machine. The study found that: the alloy is mainly composed of α-Mg matrix and Mg17Al12 phase, trace CaO interacted with Mg and Al in the alloy interacted generated a new phase Al2Ca and Mg2Ca, the addition of CaO improved the microstructure of cast AZ81 magnesium alloy, reduced the reunion of Mg17Al12 on grain boundary and had some effects on the refinement of alloy grain, improved the mechanical properties of AZ81 magnesium alloy. When the CaO content is 0.5%, the tensile strength of as-cast AZ81 magnesium alloy at room temperature is 173 MPa which is increased by about 9.8% compared to the tensile strength of AZ81's 142 MPa at room temperature.