The increase of corrosion resistance of magnesium and its alloys by forming the smart self-healing hybrid coatings was achieved in this work in two steps. In the first step, using the plasma electrolytic oxidation (PEO) treatment, a ceramic-like bioactive coating was synthesized on the surface of biodegradable MA8 magnesium alloy. During the second step, the formed porous PEO layer was impregnated with a corrosion inhibitor 8-hydroxyquinoline (8-HQ) and bioresorbable polymer polycaprolactone (PCL) in different variations to enhance the protective properties of the coating. The composition, anticorrosion, and antifriction properties of the formed coatings were studied. 8-HQ allows controlling the rate of material degradation due to the self-healing effect of the smart coating. PCL treatment of the inhibitor-containing layer significantly improves the corrosion and wear resistance and retains an inhibitor in the pores of the PEO layer. It was revealed that the corrosion inhibitor incorporation method (including the number of steps, impregnation, and the type of solvent) significantly matters to the self-healing mechanism. The hybrid coatings obtained by a 1-step treatment in a dichloromethane solution containing 6 wt.% polycaprolactone and 15 g/L of 8-HQ are characterized by the best corrosion resistance. This coating demonstrates the lowest value of corrosion current density (3.02 × 10−7 A cm−2). The formation of the hybrid coating results in the corrosion rate decrease by 18 times (0.007 mm year−1) as compared to the blank PEO layer (0.128 mm year−1). An inhibitor efficiency was established to be 83.9%. The mechanism of corrosion protection of Mg alloy via smart hybrid coating was revealed.