In this study, magnesium-zinc (Mg-Zn) alloy was investigated as a biodegradable orthopedic implant. MC3T3-E1 cell attachment, mineralization and osteogenic-specific mRNA expression were assessed for as measurements of the in vitro biocompatibility of Mg-Zn alloy. In vivo degradation of the Mg-Zn alloy and the accompanying new bone formation in the femoral marrow cavity were analyzed by scanning electron microscopy and histomorphological analysis. Results showed that MC3T3-E1 cells cultured on Mg-Zn alloy samples manifested better attachment and mineralization ability, as well as improved mRNA expression of collagen 1 α 1 (COL1α1) and osteocalcin (OC), compared with cells seeded on poly-L-lactic acid (PLLA) samples. In vivo experiments demonstrated that, compared with PLLA materials, the Mg-Zn alloy not only degraded faster, but was accompanied by considerable new bone formation around the samples. Our data indicate that Mg-Zn alloy has excellent biocompatibility for application as degradable bone implants.