The impact of different oxidation atmospheres on the formation of magnesium-bearing magnetite in the Fe3O4–MgO and Fe2O3–MgO systems was investigated using FactSage 8.3 thermodynamic modeling, XRD, XPS, and SEM-EDS. This study also examined the influence of MgO on the compression strength, mineral phase composition, and microstructure of oxidized roasting magnetite pellets. At 500 °C, Fe3O4 oxidized into fine crystalline nuclei of Fe2O3. Subsequently, at 900 °C, Fe2O3 reacted with MgO to completely form magnesia-bearing magnetite. Conversely, in a vacuum, Fe3O4 and MgO did not produce magnesium-bearing magnetite. For the Fe2O3–MgO system under vacuum, only a small quantity of magnesia-containing magnetite was generated when the temperature reached 900 °C, which was substantially less than that produced in an O2 atmosphere from Fe3O4 with MgO. The formation of magnesia-containing magnetite was closely associated with the nucleation of hematite grains during the oxidation roasting process of magnetite. Increasing the MgO content in the pellets led to a higher MgO content in the spinel phase, while the contents in the pyroxene and slag phases remained relatively stable. Additionally, the Fe2+/(Fe2+ + Fe3+) ratio in the pellets increased as the MgO content rose. During the preparation of hematite pellets through the oxidation roasting of magnetite, the oxidation of magnetite to hematite followed by reaction with MgO resulted in the formation of magnesium-bearing magnetite, which subsequently reduced the compressive strength of the pellets.