Calcium phosphate cement (CPC) has been successfully used in clinics as bone repair biomaterial for many years. However, poor mechanical properties and a low biodegradation rate limit any further applications. Magnesium phosphate cement (MPC) is characterized by fast setting, high initial strength and relatively rapid degradation in vivo. In this study, MPC was combined with CPC to develop novel calcium-magnesium phosphate cement (CMPC). The setting time, compressive strength, phase composition of hardened cement, degradation in vitro, cells responses in vitro by MG-63 cell culture and tissue responses in vivo by implantation of CMPC in bone defect of rabbits were investigated. The results show that CMPC has a shorter setting time and markedly better mechanical properties than either CPC or MPC. Moreover, CMPC showed significantly improved degradability compared to CPC in simulated body fluid. Cell culture results indicate that CMPC is biocompatible and could support cell attachment and proliferation. To investigate the in vivo biocompatibility and osteogenesis, the CMPC samples were implanted into bone defects in rabbits. Histological evaluation showed that the introduction of MPC into CPC enhanced the efficiency of new bone formation. CMPC also exhibited good biocompatibility, biodegradability and osteoconductivity with host bone in vivo. The results obtained suggest that CMPC, having met the basic requirements of bone tissue engineering, might have a significant clinical advantage over CPC, and may have the potential to be applied in orthopedic, reconstructive and maxillofacial surgery.