In this study, Flaky magnesium hydroxide with highly dispersion was prepared from light-burned magnesia by hydration hydrothermal method. The influence of different hydration temperature, hydration time, hydrothermal time and dispersant system on the morphology of magnesium hydroxide material was investigated systematically. The morphology, phase composition and specific surface area of magnesium hydroxide were investigated by X-ray diffraction (XRD), scanning electronic microscope (SEM), and accelerated surface area and porosimetry (ASAP). The highly dispersed flaky flame-retardant magnesium hydroxide was further surface modified and then its flame retardation property was tested. Results demonstrated that the light-burned magnesium oxide could completely transform to magnesium hydroxide at 90 ℃ for 1 h hydration, and the products were uniform hexagonal flake with thickness about 20～30 nm. When the hydrated magnesium hydroxide further hydrothermal reacted at 160 ℃ for 23 h, the crystal structure changed. According to the XRD pattern, (100) face appeared more, while the stronger (001) face became less visible, and the ratio of I₀₀₁/I₁₀₁ was about 1.80. It indicated that controlling hydrothermal reaction condition would change the growth direction of magnesium hydroxide crystal, and the surface polarity and internal stress of the crystals decreased when the hydrothermal reaction time was extended. SEM observation indicated that the thickness of magnesium hydroxide hexagonal flake increased to 80～100 nm after hydrothermal reaction. Moreover, the dispersion of the product was enhanced and the aggregation was reduced after further surface modification and regulation by dispersant. Thus, the specific surface area was 9.1668 m²/g. When the modified highly dispersed magnesium hydroxide was added to the PVC composite system, the oxygen index of the system was 27.3. Under the same condition, the oxygen index of ordinary magnesium hydroxide and calcium carbonate were 25.7 and 22.7, respectively. This result declared that the addition of highly dispersed magnesium hydroxide could enhance the flame retardancy of PVC composite system.