The demand for effective microwave-absorbing materials has recently surged due to rapid advancements in electromagnetic (EM) devices. Recently, engineering oxygen vacancies has also become one of the effective ways to develop efficient microwave-absorbing materials. So, understanding the EM absorption mechanism of these materials has become crucial for better engineering of such materials. This article investigates the magnetic properties along with the EM absorption mechanism of M-type hexaferrite, with optimal incorporation of rare-earth element La3+ and doping of transition metal Al3+ cation. The presence of La3+ ions at an optimal level promotes the reduction of Fe3+ to Fe2+ cations and creating oxygen vacancies to offset the electrical charge imbalance. This phenomenon impacts both the magnetic and EM characteristics of the materials. The presence of Fe2+ cations enhanced the spin-orbital interaction, resulting in a strong magnetic anisotropy field along the c-axis. The lowest reflection loss of −36.37 dB at 14.19 GHz, is observed with a bandwidth of 3.61 GHz below −10 dB for x = 0.6. These microwave absorption properties can be attributed to the adequate compensation between dielectric and magnetic losses, which arise from phenomena like dielectric relaxation, magnetic resonance, and conduction loss due to electron hopping between Fe3+ and Fe2+ with proper incorporation of the attenuating constant and excellent impedance matching, along with microstructure of the materials. Furthermore, the material’s exceptional absorption properties are also influenced by the rapid movement of oxygen vacancies from its interior to its surface when exposed to high frequencies, thereby impacting its conductivity. Therefore, it is believed that the regulation of oxygen vacancies can serve as a versatile strategy for developing materials with efficient microwave-absorbing capabilities.