The influences of a small amount of CaO addition on the microstructure and corrosion behavior of AZ81 casting alloy have been investigated by means of optical microscopy, scanning electron microscopy, X-ray photoelectron spectroscopy, immersion and electrochemical tests. The added CaO led to the refinement of ${alpha}$-Mg grains and the decrease in ${eta}$ precipitate content by the formation of an $Al_2Ca$ phase. The AZ81-CaO alloy had a better corrosion resistance than the AZ81 alloy. The microstructural characterization on the corroded surface revealed that the enhanced corrosion resistance of the CaO-containing alloy may well be ascribed to the increased barrier effect of precipitates formed more continuously along the grain boundaries and the incorporation of Al and Ca elements into the corrosion film, by which it became more protective.