To inhibit the corrosion of magnesium alloy in electroless nickel plating bath, nickelous hydroxide and phytic acid were used as main salt and corrosion inhibitor to inhibit the dissolution of substrate during the nickel deposition process. Effects of nickel ion and phytic acid concentration on plating rate and porosity were studied by single-factor experiment, and the optimum concentrations were obtained at 8.8 g/L and 4 ml/L, respectively. Deposition process of nickel phosphorus (Ni-P) coating was observed by using scanning electron microscope (SEM) and activation energy of Ni deposition process was estimated by Arrhenius equation. SEM observation showed that Ni deposition process could be divided into two stages, the first stage was Ni replacement reaction competition with corrosion inhibition reaction of substrate, the second stage was Ni autocatalysis reduction process. Potentiodynamic polarization curve revealed that Ni-P coating exhibited good corrosion resistance in protecting magnesium alloy. Scratch and thermal shock tests showed excellent adhesion between the Ni-P coating and magnesium alloy substrate.