Surface functionalization of semiconducting metal oxides has emerged as a highly effective approach for enhancing their sensing capabilities. In the present work, the surface of randomly oriented zinc oxide (ZnO) nanowires is modified with an optimized thickness (7 nm) of magnesium oxide (MgO), which exhibits an exceptionally sensitive and selective behavior toward NO 2 gas, yielding a response of approximately 310 for 10 ppm concentration at room temperature. The synergistic interplay between ZnO and MgO leads to a remarkable 20-fold improvement in sensor response compared to a pristine ZnO film and allows the detection of concentrations as low as 50 ppb. The ZnO− MgO composite was characterized using X-ray diffraction (XRD), XPS, and SEM-EDS to gain structural, compositional, and morphological insights. The interaction of the NO 2 molecule with the sensor film was investigated using density functional theory (DFT) simulations, revealing that oxygen vacant sites on the MgO surface are most favorable for NO 2 adsorption, with an adsorption energy of −3.97 eV and a charge transfer of 1.74e toward NO 2 . The XPS, photoluminescence (PL), and EPR measurements experimentally verified the presence of oxygen vacancies in the sensing material. The introduction of localized levels within the band gap by oxygen vacancies significantly promotes the interaction of gas molecules with these sites, which enhances the charge transfer toward NO 2 gas molecules. This augmentation has a profound influence on the space charge region at the ZnO− MgO interface, which is pivotal for modulating the charge transport in the ZnO layer, resulting in the substantial improvement of NO 2 response at room temperature.