Human mesenchymal stem cells (MSC) interact with numerous immune cells that can promote regenerative processes and inhibit inflammatory responses. We hypothesised that the cross-talk between human umbilical cord perivascular cells (HUCPV; an alternative source of MSC) and peripheral blood mononuclear cells (PBMC) could be influenced by degradable transwell magnesium (Mg). To study the correlations between paracrine signaling and specific cellular behaviour during the host response to Mg, we used a transwell coculture system for up to 7 days. The proliferation and viability of both cell types were not significantly influenced by Mg. When HUCPV were cultured with degradable Mg, a moderate inflammation (e.g., lower secretions of pro-inflammatory interleukin 1 beta and IL2, and tumour necrosis factor alpha, interferon gamma, anti-inflammatory interleukins 4, 5, 10, 13, and 1 receptor antagonists and granulocyte colony stimulating factor), and an increased pro-healing M2 macrophage phenotype were observed. Moreover, when PBMC were cultured with degradable Mg, the expression of migration/wound healing related cytokines (interleukin 8, granulocyte-macrophage colony-stimulating factor, monocyte chemoattractant protein 1 and macrophage inflammatory protein 1α/β) was upregulated, accompanied by an increase in the migration ability of HUCPV (cell scratch assay). In addition, an increased pro-osteogenic potential was demonstrated via an increase of osteoblastic markers (e.g., alkaline phosphatase activity, specific gene expression and cytokine release). These results collectively imply that Mg possesses osteo-immunomodulatory properties. They also help to design Mg-based bone substitute biomaterials capable of exhibiting desired immune reactions and good clinical performance.