In vitro, in vivo, and clinical studies have shown how the physicochemical and biological properties of β-tricalcium phosphate (β-TCP) work in bone regeneration. This study aimed to improve the properties of β-TCP by achieving optimum surface and bulk β-TCP chemical/physical properties through the hydrothermal addition of magnesium (Mg) and to later establish the biocompatibility of β-TCP/Mg for bone grafting and tissue engineering treatments. Multiple in vitro and in vivo analyses were used to complete β-TCP/Mg physicochemical and biological characterization. The addition of MgO brought about a modest rise in the number of β-TCP surface particles, indicating improvements in alkaline phosphatase (ALP) activity on day 21 (p < 0.05) and in the WST-1assay on all days (p < 0.05), with a corresponding increase in the upregulation of ALP and bone sialoprotein. SEM analyses stated that the surfaces of the β-TCP particles were not altered after the addition of Mg. Micro-CT and histomorphometric analysis from rabbit calvaria critical defects resulted in β-TCP/Mg managing to reform more new bone than the control defects and β-TCP control at 2, 6, and 8 weeks (* p ≤ 0.05, ** p ≤ 0.01, *** p ≤ 0.001, and **** p ≤ 0.0001). The hydrothermal addition of MgO to the β-TCP surfaces ameliorated its biocompatibility without altering its surface roughness resulting from the elemental composition while enhancing cell viability and proliferation, inducing more bone regeneration by osteoconduction in vivo and osteoblastic differentiation in vitro.