Zinc oxide (ZnO)-based thin-film transistors (TFTs) have attracted increasing attention towards flat-panel displays as alternatives to silicon-based TFTs due to their transparency to visible light. Magnesium oxide (MgO) has a wide bandgap (7.8 eV) and high dielectric constant (k). This leads to the development of TFTs using MgO as a gate oxide layer, which can significantly reduce the operating voltage. However, the electrical properties and dielectric constant of MgO are determined from the percentage of oxygen in MgO. In this study, a MgO gate-oxide was deposited on ZnO by magnetron sputtering at various oxygen concentrations (0, 66, and 100%) to fabricate TFTs. With an increase in the oxygen concentration, the oxygen vacancies of MgO were compensated, thereby improving the crystallinity and enhancing the dielectric constant from 6.53 to 12.9 for the oxygen concentrations of 0 and 100%. No pinch-off (saturation) behavior was observed in the TFTs with 0% oxygen; however, the pinch-off voltages were significantly reduced to 17 and 2 V in the TFTs with 66 and 100% oxygen, respectively; hence, the TFT-100 could be operated at a low operating voltage (2V). With an increase in oxygen from 0 to 100%, the threshold voltage and trap-state density significantly decreased from -159 V and 1.6 × 1018 cm−3 to -31.4 V and 6.5 × 1016 cm−3, respectively. The TFTs with 0% oxygen exhibited a higher field-effect mobility of 12 cm2/V-s due to the uncompensated oxygen vacancy in ZnO, which had a higher electron concentration. After introducing oxygen atoms, the field-effect mobility decreased to 0.16 cm2/V-s in the TFTs with 66% oxygen, which can be attributed to the compensated oxygen vacancy and lower electron concentration. In contrast, the field-effect mobility increased to 1.88 cm2/V-s for the TFTs with 100% oxygen due to the enhanced dielectric constant and crystallinity of MgO.