ABSTRACT The long‐term viability of sodium‐ion batteries (SIBs) hinges on improving cathode stability while maximizing energy density and efficiency. O3‐layered cathodes, with high sodium content, are ideal for achieving high capacity, but their long‐term structural stability is challenged by the electrochemical conditions in SIBs. Here, the impact of Mg doping on the transition metal site in O3‐type NaNi 0.2 Fe 0.4 Mn 0.4 O 2 (NFM244) cathodes is investigated, revealing its influence on phase stability, anion redox ability, and Na‐ion diffusion kinetics. Experimental and theoretical studies confirmed that Mg 2+ preferentially substitutes the Fe 3+ sites, mitigating transition metal ions migration and lattice strain while suppressing irreversible oxygen release. Optimal 5% Mg doping maintains a stable O3‐layered structure, enhanced capacity, and Na‐ion kinetics, improving capacity retention during extended cycling over 200 cycles. In contrast, excessive Mg substitution causes structural distortion, impeding Na‐ion mobility, and results in severe capacity fading during prolonged cycling. In situ online electrochemical mass spectroscopy (OEMS) combined with X‐ray photoelectron spectroscopy (XPS) and Raman spectroscopy revealed that Mg doping also suppresses detrimental electrolyte decomposition. These findings provide a strategic pathway for tailoring next‐generation sodium‐ion cathodes for scalable high‐performance energy storage solutions, underscoring the potential of Mg doping in O3‐layered cathodes.