Biodegradable magnesium and magnesium alloys have received much attractions due to their light weight, suitable elastic modulus, biodegradability and excellent biocompatibility. However, the magnesium corrodes too fast in vivo, accompanied with hydrogen evolution and increase of PH value in local tissues around during degradation, which plays a detrimental role in the surrounding tissues and leads to hemolysis and bone tissue absorption sometimes. The poor corrosion resistance of Mg and Mg alloys limits in their clinical applications. Addition of proper alloying elements and surface modification of magnesium alloys are expected to be effective methods for retarding the corrosion rate and attaining controllable degradation behavior of Mg alloys. In this paper, investigations on antibacterial properties and hemolysis of biodegradable magnesium alloys are reviewed and research progresses of biocompatibility of biodegradable magnesium alloys in recent five years are systematically discussed. The development directions and challenges of biodegradable magnesium alloys in the future are presented.