MgO thin films were reactively deposited using an internal inductively coupled plasma assisted sputtering method varying reactive gas ratio to get stoichiometric film composition, and bipolar dc substrate bias to suppress micro arcs. The minimum frequency required for arc suppression was about 10KHz depending on ICP power. Their crystallinity was analyzed using X-ray diffraction and surface morphology using AFM. The surface was very smooth with rms roughness less than 0.42nm. The preferred orientation of the films were changing from (200) to bulk-like characteristics as Ar: $O_2$ratio was controlled to 10 : 2. Optical emission spectroscopy revealed that there were two distinct discharge modes: a blue one and a green one, where enhanced emission from Ar and Mg were observed. This cannot simply be understood by metallic or oxide mode of reactive sputtering due to ICP coupled to magnetron discharge.