CaO additions are used as an inexpensive replacement for Ca in Mg alloys. CaO dissociation in Mg has been reported in literature without a clear mechanism as to why this occurs. In situ synchrotron radiation diffraction investigation of the melting and solidification of Mg with CaO shows, that the stability of CaO was overestimated in Mg melts compared with MgO. The experiments that were performed on the Mg-20CaO and Mg-xCa-6CaO (x = 6 and 16 wt.%) alloys, show the dissociation and formation of various phases during melting and solidification. The results indicate that Mg can reduce CaO even in the solid state, which is the opposite of that proposed by the Ellingham diagrams for stoichiometric reaction. Phase formations during the in situ experiment are compared with published thermodynamic calculations for the interaction between Mg-Ca alloys and oxides.